Holiday entitlement for different employment types
Giving the correct holiday entitlement for different types of workers can be very confusing. And the legislation behind them can be more confusing still! But it’s important to get to grips with how you make these calculations so you pay your employees fairly for the holiday they’re owed.
It’s essential to understand the rules around holiday entitlement and pay to ensure employees receive their correct entitlements and avoid any potential legal issues. After all, we’ve seen a huge hike in holiday pay issues coming to employment tribunals recently. But when different employment types work it out differently, where do you start?
We’ve listed the different ways you might pay your workers below, and the holiday entitlement they should receive.
Let’s start simple.
Full-time employees are entitled to a minimum of 5.6 weeks’ paid holiday per year. This includes what is commonly known as Bank Holidays (though legislation dictates these as the 1.6 weeks of additional holiday under regulation 13A of Working Time Regulations 1998).
Of course, the employer may choose to give more than the statutory minimum of holiday. These additional weeks are known as contractual holiday entitlement.
Part-time employees are entitled to the same amount of holiday as full-time employees, which equates to 5.6 weeks, calculated on a pro-rata basis.
For example, should an employee work a 3 day week, the 28 days would be pro-rated to 16.8 days entitlement. Starting with 5.6 weeks entitlement, this is worked out as:
5.6 weeks x 5 working days a week = 28 days entitlement for full-timers
28 days / 5 days a week = 5.6 days holiday per day worked a week
5.6 x 3 days worked a week = 16.8 days holiday entitlement for a 3-day worker
This applies to when an employer gives more than the statutory holiday entitlement as well. E.g.
30 days entitlement for a full-timer / 5 days a week = 6 days holiday per day worked a week
6 x 3 days worked per week = 18 days holiday entitlement for a 3-day worker
If an employee works all 5 days, but has varying hours each day, they are still entitled to 28 days holiday. However, the legislation does not offer any guidance to how an employer should convert days into hours in this case. It’s up to employers to make those calculations themselves.
Employers need to ensure that they calculate holiday entitlement and pay for part-time employees accurately. You can use our part-time holiday calculator for this.
Note that calculating holiday pay is calculated differently, using average holiday pay instead.
Casual employees are likewise entitled to a minimum of 5.6 weeks’ paid holiday per year, calculated on a pro-rata basis. Calculating holiday pay for casual employees can be more complex.
The calculation on the government’s website states this is based on:
Weeks of yearly entitlement multiplied by the proportion of time in employment, which can be worked out by days worked / days in a year, or months worked / 12 months. This works out the weeks they are due as holiday entitlement. Use our calculator to work out your casual worker’s holiday entitlement quickly.
In some sources, the average hours and days worked over this period can be applied to get their hourly holiday entitlement, that can be used on rolled-up pay. However this is not in legislation. The legislation only works out holiday entitlement by weeks, and employers need to use their discretion when figuring out how to apply this to days or hours.
Gov.uk recommends their holiday pay can be calculated as an average of their earnings over the previous 52 weeks worked (as usual, taking the last whole week in which they worked and earned pay, ending on a Saturday, as the most recent week.)
Fixed-term contract employees
Fixed-term contract employees are entitled to the same holiday entitlement as permanent employees, calculated on a pro-rata basis.
Employers need to ensure that they calculate holiday entitlement and pay for fixed-term contract employees accurately. If the contract is for less than a year, their holiday entitlement will be calculated based on the number of weeks they work. Like part-time employees, they have a pro-rated amount of 5.6 weeks holiday entitlement.
Annualised hours employees
Annualised hours employees work a set number of hours over the course of a year, but their hours may vary from week to week.
As usual, to calculate their holiday entitlement you use 5.6 weeks / or 28 days pro-rated for less than 5 days a week working. There is no guidance on how to exactly calculate this to an hourly entitlement.
Compressed hours employees
Compressed hours employees usually work their full-time hours over fewer days each week. Their holiday entitlement is calculated based on the number of days they work each week.
Calculating holiday pay for compressed hours employees is the same as for part-time employees.
For example, a 4-day worker would have this calculation:
5.6 days entitlement per day worked a week x 4 days worked a week = 22.4 days holiday entitlement
However, although this works out as fewer days off than their full-time equivalent, the employee should still get an equivalent amount of time off in hours, because their working days are longer.
Short contracts (including temporary agency workers)
For short-term or temporary contracts, workers accrue holiday entitlement from their first day of employment. The amount they accrue based on the proportion of the year they’ve worked for the company, which is applied to their yearly holiday entitlement of 5.6 weeks or more.
If they’ve not taken all their accrued leave by the end of their contract, they should be paid in lieu for any holiday not taken, subject to the leave date being in the same holiday year. The employer is responsible to ensure they regularly communicate to the employee about their remaining holiday allowance each holiday year and ensure that they are taken.
In summary, many of the same calculations come up when working out holiday entitlement for workers in different types of employment. As an employer you need to ensure you’re not accidentally short-changing anyone when it comes to their holiday entitlement.
This article is meant for advice based on government guidance, but it’s up to you to understand the legislation and apply it to your own calculations. If you’re unsure, it’s always best to speak to a payroll professional who can advise you.