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Calculating Holiday Pay

  • Member PM.Dip
  • Practice Licence
  • 5 posts
  • # 121352

Hi Everyone,

I do some work for a small accountancy firm and there is one employer that insists on working out their holiday pay in a way I've never heard of. Can someone advice me if this is correct or not.

 

He works out the avaerage hours worked over 12 months then divide by 52 (to get av.weekly hours) multiply by 5.6 (weeks entitled in the year) which gives him the total hours for the week then multiply by hourly rate (gives total hours for the year) then divide by 52 which gives the total amount of holiday pay per week.

e.g. 303 hrs in the year / 52 = 5.83 per week x 5.6 = 32.65 x hourly pay £7.50 = 244.88 hrs in the year / 52 = £4.71 per week.

 

or if done by averaging the last 12 week 

e.g 69.98 hrs in 12wks / 12 = 5.83 per week x 1.29 =7.52 x hourly pay £7.50 = 56.40 hrs per 12 weeks / 12 = £4.70 per week.

 

Hope someone can make sense of all this. And if so is the client correct in wanting the holiday pay calculated in this way. This means that the employee gets his £4.70 per week even when he is off on holiday.

 

Many Thanks in Advance

Rose

  • Practice Licence
  • 11 posts
  • # 121369

Hi Rhosyn,

ICB can understand what your client is doing and it is admirable that they have sought to calculate average hours over a 52-week period.  Plus, they have recognised that there is a statutory entitlement to give workers 5.6 weeks holiday leave.

However, there are some things that it is necessary to point out:

 

  • The holiday pay reference period (the 52 weeks) is calculated looking back at the 52 weeks of worked hours prior to the start of the holiday leave.  Whilst it is fine to use a calculation to give an indication of the leave to the worker, this should be reperformed when the worker takes leave
  • The multiplication by the hourly rate gives an indication of the value of this holiday leave to the worker.  However, like the leave calculation itself, this should be performed looking at the average pay received in the 52 weeks prior to the start of leave
  • Holiday pay should be paid at the time that the worker takes the leave.  It is incorrect to make a payment in advance of this and I would point to the guidance on Gov.UK in the section ‘Rolled-up holiday pay’

Hope this helps!

Team ICB

  • Member PM.Dip
  • Practice Licence
  • 5 posts
  • # 121372

Alex @ ICB said:

Hi Rhosyn,

ICB can understand what your client is doing and it is admirable that they have sought to calculate average hours over a 52-week period.  Plus, they have recognised that there is a statutory entitlement to give workers 5.6 weeks holiday leave.

However, there are some things that it is necessary to point out:

 

  • The holiday pay reference period (the 52 weeks) is calculated looking back at the 52 weeks of worked hours prior to the start of the holiday leave.  Whilst it is fine to use a calculation to give an indication of the leave to the worker, this should be reperformed when the worker takes leave
  • The multiplication by the hourly rate gives an indication of the value of this holiday leave to the worker.  However, like the leave calculation itself, this should be performed looking at the average pay received in the 52 weeks prior to the start of leave
  • Holiday pay should be paid at the time that the worker takes the leave.  It is incorrect to make a payment in advance of this and I would point to the guidance on Gov.UK in the section ‘Rolled-up holiday pay’

Hope this helps!

Team ICB


 Hi Alex

Thank you very much for that much appreciated. I shall explain all this to the employer.

Rose

  • Member PM.Dip
  • Practice Licence
  • 5 posts
  • # 121373

Rhosyn said:

Alex @ ICB said:

Hi Rhosyn,

ICB can understand what your client is doing and it is admirable that they have sought to calculate average hours over a 52-week period.  Plus, they have recognised that there is a statutory entitlement to give workers 5.6 weeks holiday leave.

However, there are some things that it is necessary to point out:

 

  • The holiday pay reference period (the 52 weeks) is calculated looking back at the 52 weeks of worked hours prior to the start of the holiday leave.  Whilst it is fine to use a calculation to give an indication of the leave to the worker, this should be reperformed when the worker takes leave
  • The multiplication by the hourly rate gives an indication of the value of this holiday leave to the worker.  However, like the leave calculation itself, this should be performed looking at the average pay received in the 52 weeks prior to the start of leave
  • Holiday pay should be paid at the time that the worker takes the leave.  It is incorrect to make a payment in advance of this and I would point to the guidance on Gov.UK in the section ‘Rolled-up holiday pay’

Hope this helps!

Team ICB


 

 


 

  • Fellow PM.Dip
  • Practice Licence
  • 40 posts
  • # 121430

Hi Rhosyn,

 

I have just seen your post, so I apologise for jumping in a bit lateer on.

In your example I think you are confusing the rate of pay with the actual holiday entitlement of your client.

As Alex says you need to use the Holiday entitlement calculator on ther Gov.UK website to work out someones actual holiday entitlement, if it is less than the minimum of 5.6 weeks. Part timers get a pro rata entitlement of the 5.6 weeks.

So if your client, using your example, works 303 hours per year then this is 5.83 hours per week X 5.6 =32.65 hours annual holiday entitlement. Then if the hourly pay rate is £7.50, then the annual holiday pay is £244.88. So not hours as you stated.

Then if your client works an average of 5.83 hours per week and then takes a full week's holiday then the Holiday pay is 5.83 X £7.50 (hourly pay rate) give the holiday pay amouint as £43.73.  So not your figure of £4.71.

I hope this makes sense.

Adam

FICB PM.Dip

  • Member PM.Dip
  • Practice Licence
  • 5 posts
  • # 121431

Adam said:

Hi Rhosyn,

 

I have just seen your post, so I apologise for jumping in a bit lateer on.

In your example I think you are confusing the rate of pay with the actual holiday entitlement of your client.

As Alex says you need to use the Holiday entitlement calculator on ther Gov.UK website to work out someones actual holiday entitlement, if it is less than the minimum of 5.6 weeks. Part timers get a pro rata entitlement of the 5.6 weeks.

So if your client, using your example, works 303 hours per year then this is 5.83 hours per week X 5.6 =32.65 hours annual holiday entitlement. Then if the hourly pay rate is £7.50, then the annual holiday pay is £244.88. So not hours as you stated.

Then if your client works an average of 5.83 hours per week and then takes a full week's holiday then the Holiday pay is 5.83 X £7.50 (hourly pay rate) give the holiday pay amouint as £43.73.  So not your figure of £4.71.

I hope this makes sense.

Adam

FICB PM.Dip


 Thank you very much for all that, I shall try and explain it all to the employer.

 

Rose

MICB PM.Dip

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