From 1 January 2024, the components which must be included when calculating ‘normal’ rate of pay are defined in regulations. Holiday pay is based on the legal principle that a worker should not suffer financially for taking holiday. The amount of pay that a worker receives for the holiday they take depends on the number of hours they work and how they are paid for those hours.
Table 6: rolled-up holiday pay calculation when a worker’s basic pay is their normal pay
This may mean that the actual reference period takes into account pay data from further back than 52 weeks from the date of their leave. If this gives fewer than 52 weeks to take into account, then the reference period is shortened to that lower number of weeks. Her employer will need to calculate her statutory holiday entitlement after each of these leave periods. The government has introduced reforms to simplify holiday entitlement and holiday pay calculations in the Working Time Regulations. For example, if an employee’s daily pay varies in the pay period, but the variation is so regular and predictable that it’s also straightforward to determine RDP, the employer can choose either RDP or ADP.
- Visit employment status for further information on employment status and definitions.
- The rate of holiday pay is often higher than regular pay, providing an incentive for employees to work on these days.
- The employer is only required to perform this calculation once per period of leave.
- For example, a worker may take maternity leave, return to work, then be off sick at some point within the next 52 weeks.
- Workers can normally carry over a maximum of 8 days into the next leave year, with the agreement of their employer.
The reference period must not include weeks where the worker received no pay or weeks when a worker was for any amount of time on sick leave or statutory leave, such as maternity leave. Annual leave and holiday pay are both important components of employment that contribute to employee well-being and work-life balance. While annual leave provides employees with the flexibility to take time off work and recharge, holiday pay recognizes the how annual leave and holiday pay work efforts of those who work during designated holidays.
Creditable Service for Leave Accrual
Our view is that redundancy would generally be received as compensation and not earnings. However, if an employer wants to minimise the risk of not complying with the Holidays Act 2003, they could include redundancy payments in gross earnings. Employees are entitled to paid annual holidays, public holidays, alternative holidays, sick leave, bereavement leave and family violence leave if they meet certain criteria. Although employees start accruing leave from their first day of work, the annual leave entitlement comes into effect after 12 months of employment, unless you wish to allow employees to take leave in advance of its accrual. If a worker leaves their job part-way through a leave year, a calculation should be completed to check the worker has received the statutory minimum holiday entitlement to which they are entitled. An agency worker who is a ‘worker’ but not an ‘irregular hours worker’ or a ‘part-year worker’, will continue to accrue leave at one twelfth of their entitlement at the start of each month during their first year of employment.
Most employers will be using this calculation for workers who only take a single period of leave, such as maternity leave. Employees may request annual leave instead of using sick leave (see Sick Leave (General Information) fact sheet). Although an employee may request annual leave for sick leave purposes, annual leave is subject to supervisory approval and may be denied. If an employee chooses to use annual leave for sick leave purposes, he or she may want to share the reason for the request with the supervisor so that the request receives proper consideration. Average daily pay (ADP) is the daily average of the employee’s gross earnings over the past 52 weeks. An individual or organisation that hires 1 or more employees and contracts them to work in exchange for wages or salary under a ‘contract of service’ (commonly called an ‘employment agreement’).
Days worked per week example
The date at which an employee can take annual leave is the first anniversary of their employment. However, there are some exceptions to this rule if, for example, your business has an annual closedown period (such as Christmas), or if an employee has taken unpaid leave of more than one week throughout the year. The reference period must only include weeks for which the worker was actually paid. Where this gives less than 52 weeks to take into account (that is, where the worker has many weeks without any remuneration), the reference period is shortened to that lower number of weeks.
- Before reading this guidance, you should check the guidance on holiday entitlement.
- An employer should discount weeks 6, 23 to 25 and 46 to 48 in Table 9, which is 7 weeks, as there was no pay in these weeks, reflecting that the worker performed no work.
- If this gives fewer than 52 weeks to take into account, then the reference period is shortened to that lower number of weeks.
- The date at which an employee can take annual leave is the first anniversary of their employment.
- From 1 January 2024, the components which must be included when calculating ‘normal’ rate of pay are defined in regulations.
Leave without pay and annual holidays
Pay received by a worker while they are on holiday should reflect what they would have earned if they had been at work and working. Her statutory entitlement in days is the lower of 28 days or 5.6 x 4 days (22.4 days). Melanie would qualify as a part-year worker if her contract reflects that there are periods of time that last more than a week when she is not contracted to work and does not receive pay. All references to ‘worker’ refer to all individuals whose employment status is either as a ‘worker’ or an ‘employee’, meaning they are entitled to paid holiday. Visit employment status for further information on employment status and definitions. It is not intended to be relied upon in any specific context or as a substitute for seeking advice (legal or otherwise) on a specific circumstance, as each case may be different.
What gross earnings do not include
Employees can choose when to take their annual leave, subject to approval from their employer. This allows individuals to plan vacations, attend family events, or simply take a break from work when it suits them best. Additionally, annual leave can be accumulated over time, allowing employees to save up their days for longer vacations or special occasions.
If annual leave is carried over where a worker is paid using rolled-up holiday pay, the leave will already have been paid at the time the work was done. Rolled-up holiday pay allows employers to include an additional amount with every payslip to cover a worker’s holiday pay, as opposed to paying holiday pay when a worker takes annual leave. An employer must allow a worker who is unable to take their statutory holiday entitlement as they are on maternity or other family related leave to carry over all their holiday entitlement to the following leave year.
If such circumstances result in an employee being unable to reschedule and use “use or lose” leave before the end of the leave year, the leave will be forfeited. When “use or lose” leave is forfeited under such conditions, it cannot be restored. With at least 14 days’ notice, you can require employees to take annual holidays over any customary closedown period.
When it comes to flexibility, annual leave offers more options for employees. They can choose when to take their leave, allowing for personalized planning and the ability to align with personal commitments or travel opportunities. In contrast, holiday pay is tied to specific holidays or designated days, limiting the flexibility in terms of when employees can earn the additional compensation. For example, another employee has already requested leave for this period of time, or it is an exceptionally busy period for the business and annual leave cannot be granted during this period.
An employer should discount weeks 6, 23 to 25 and 46 to 48 in Table 9, which is 7 weeks, as there was no pay in these weeks, reflecting that the worker performed no work. As 7 weeks have to be discounted, the employer must go back a further 7 weeks to take the total to 52 weeks of pay data when calculating holiday pay for this period. First period of maternity or family related leave or period off sick (19 weeks of shared parental leave for Sharon). The guidance focuses on the legal minimum entitlement of 5.6 weeks’ paid holiday.