Are you looking at a way of Calculating holiday entitlement and pay?

Calculating holiday entitlement can be complicated, but it doesn’t have to be. In this week’s I Hate Numbers podcast I am going to look at

• how to calculate leave entitlements,
• the leave period and
• how to work out your holiday pay.

It is important that you understand these things, so you stay on the right side of the law.  Furthermore, not paying holiday pay is illegal and unethical.

Listen now!

You will learn what you need about Calculating holiday entitlement and pay with my easy-to-understand podcast.

So, tune into my weekly podcast today and make sure all your calculations done correctly. Click here right now and Listen to this week’s episode of I Hate Numbers!

Listen to find out more

Conclusion

Above all, Calculating holiday entitlement and pay puts is a must know if you employ worker.  If you’re planning to take on workers, then this is also for you.  Put yourself more in control over your business.  Listen to find out more. Furthermore, it doesn’t matter what size, shape or form your business is.  You need to understand how holiday pay works…  My podcast will help. Listen to find out more, tap into more details at HMRC.

Furthermore, my mission is to inform, inspire and educate you to get closer to your numbers. You can make more profits, save tax and time, improve your well-being and your money mindset.

Help me to help you and others by subscribing and sharing this episode in your network.  Listen now and subscribe to I Hate Numbers, so I can send it straight to your inbox every week with all the latest updates.

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Pretty much all UK workers are legally entitled to paid holiday leave, what we call statutory holiday pay, and this includes agency workers, those working irregular hours, and those on zero hours contracts. In this week's I Hate Numbers Podcast, I'm going to be looking at how you calculate leave entitlement,

the leave period, and how to actually calculate the cost, the holiday pay.

You are listening to the I Hate Numbers Podcast with Mahmood Reza. The I Hate Numbers podcast mission is to help your business survive and thrive by you better understanding and connecting with your numbers. Number love and care is what it's about. Tune in every week. Now, here's your host, Mahmood Reza.

Hi folks. Welcome to another weekly episode of I Hate Numbers, the podcast that's got a mission to improve your financial awareness, your money mindset, help you make more profit, save tax, and time. What a wonderful combination. Let's crack on with the podcast. Now, worker, by the way, does not include freelancers,

those who are self-employed, or those who are providing services through their companies. A worker is one who provides their services to you under an employment contract, whether that contract is written or otherwise. Now, failure to observe this is unethical, against the law, and potentially put you in legal and financial hot water, and we don't want that for your business.

Let's talk about leave entitlement, first of all. Most workers who work a five-day week must receive at least 28 days paid annual leave a year. That's the equivalent of 5.6 weeks of holiday. There's nothing to stop you, by the way, giving your workers more than 28 days a year, and those 28 days can include bank holidays.

That is your choice. Now, let's look at those who work part-time. Now, part-time workers are entitled to at least 5.6 weeks paid holiday, and this will amount, though, to less than 28 days. If you have a worker who works three days a week, they must get at least 16.8 days leave a year. That's the equivalent of three days

they're working per week times that magic multiple of 5.6. You may have workers who work irregular hours, shift workers, term time workers, and they are entitled to paid time off for every hour they work. It's important to remember that every hour that somebody works for you, they accrue the equivalent of holiday pay.

Now, statutory paid holiday, by the way, is limited to 28 days. So, if you've got staff working six days a week in terms of the statutory entitlement, they're only entitled to 28 days paid holiday. Remember, there's nothing stopping you, giving you more than the 28 days. I mentioned the 5.6 magic multiple earlier on.

You may come across another way of working out holiday pay, and that's using a fixed multiple of 12.07%. Now, bear with me for a moment. I'm just going to explain to you how that magic percentage is arrived at, and how you might use that instead of the multiple of 5.6. Now, we start off with the 28 days statutory entitlement, and that converts to 5.6 weeks.

If you knock that off the 52 weeks in a calendar year, that gives you 46.4 weeks of paid work, or effectively, work that can be done. If we look at it in percentage terms, 5.6 divided by 46.4 is 12.07%. So that's the mass workings for you. How do we apply that? So, if somebody works five days a week, then it's five

times 46.4 times 12.07%, and you'll get back to 28 days. Somebody's working for you three days a week. Then, it's three lots of 46.4 times the 12.07%, and you end up with 16.8 days. Now, one other good thing about that is if you've got somebody who's working on average, say 10 hours a week, then you follow that same logic, 10 hours

at the 46.4 times 12.07, and you also can work that out, what that is clocking up for each week. So, if I'm doing an average of 10 hours a week, then 10 times 12.07 means that each week that I work, I'm accruing 1.27 hours of holiday. Now, that's the entitlement dealt with. Now, let's look at the leave year. Now, you have to tell your staff the date they start for you, what your holiday year is, in theory, and hopefully in practice,

you've got that in the employment contract that you issue your staff. Now, your holiday year might run from the 1st of January to 31st of December. Your workers must take their statutory leave during this time. Now, if for any reason, and it's not that uncommon, by the way, if you haven't specified your leave year, if you're not quite sure what your leave year is, and it's not in your contract, then legally it starts on the first date of their new job for workers starting after the 1st of October, 1998.

Now, the leave year and holiday entitlement, by the way, is completely unaffected by maternity, paternity, or adoption leave. As we mentioned earlier, as soon as your worker starts working for you, they are accruing holiday, and they accrue those even if they're on maternity, paternity, or adoption leave.

Lastly, let's look at the actual cost, the holiday pay. Now, workers are entitled to a week's pay for each week of statutory leave that they take. Now, how we work out that pay is really influenced by the pattern of work, the kind of hours your worker is working for you, and how you actually pay them for those hours.

So, we're going to cover now full-time, part-time, and casual workers. Now, if the working pattern of your worker is on a fixed-hours contract, whether they're full or part-time, then the week's pay is based on what that worker's pay is for a week. Now, we're going to come to the last two here, and the word average is going to feature quite heavily.

If somebody is working shift work, fixed hours, full, or part-time, then we take the average number of fixed weekly hours that they've worked in the previous 52 weeks to get the average hourly rate. Now, you may also have workers who are what are called casual workers, and by casual we don't mean they've got a relaxed attitude to their job.

It means there's no fixed commitment for how many hours they work. You may use them as and when your business requires them. You may also have workers on what's called a zero-hours contract. Now, it's absolutely essential to remember, even if you got a worker on a zero-hours contract, they still are entitled to holiday pay.

Now, if that's the pattern of your worker, then the average pay, you look at the last 52 weeks, and you've got to look at the 52 weeks previously, but count only the weeks in which they were paid and the weeks in which they weren’t. Now, if for any reason you haven't got a 52 weeks history, you've got to go back at least another 52 weeks and you look over the last 104 weeks.

Now, the last couple of things I want to mention here is when you calculate an average hourly or weekly rate. We must only include the hours worked and how much was paid for them. The default is to take the last 52 weeks. If for any reason nothing was paid in those weeks, then you count back another 52 weeks.

Now, for those workers who have paid monthly late, calculate the average hourly pay for the last month, take into account the month's pay, and divide it by the number of hours actually worked in that month. When it comes to weekly pay, you do this by multiplying the average hourly pay by the number of hours worked in the week.

If you check the show notes to the end, by the way, there's a very handy calculator that HMRC published, which will help guide you through that. Now, the last thing to remember here, there used to be a practice called rolled-up holiday pay. So, what some employers would do is to give an hourly rate to an individual worker, and that will include the holiday entitlement.

That is not allowed. Holiday pay should be paid for the time when annual leave is taken. So, you cannot include an amount for holiday pay in the hourly rate that you give your workers. It's called rolled-up holiday pay, and that's a definite no-no. So, let's round up, folks, what we've just looked at. We've looked at how we calculate the leave entitlement,

and the key thing is, if somebody is a worker under an employment contract, written or otherwise, they are entitled to holiday pay. It makes no odds whether they're casual workers, zero hours, part-time, or full-time. The next thing we looked at is the leave year. It’s for you to decide what the leave year is.

You should, as good practice, reinforce that in a contract that you give your employees, your workers. If you don't specify the time, then it starts on the first day of their new job. And lastly, we looked at the holiday pay, the actual numbers, the money that's used to actually pay that worker. And remember, it's either based on averages if somebody has got shift working, or casual work, or zero hours.

If it's fixed hours, then you do it on their pay for the week. Folks, I hope you found this podcast useful. I'd love your feedback. I'd love you to share it with those who you feel would benefit. Until then, have a fantastic week and I'll catch you guys on the other side. We hope you enjoyed this episode and appreciate you taking the time to listen to the show.

We hope you got some value. If you did, then we'd love it if you shared the episode. We look forward to you joining us next week for another I Hate Numbers episode.