Annual Leave 101

I often get asked the question around individuals and their annual leave entitlement and calculations, hopefully this article will help to guide you with the basic legislation and principles and how it affects you as an employer.

Entitlement

All employees and workers (this could be part time employees, zero hours, casual staff, bank staff) are entitled to a statutory minimum of 5.6 weeks (28 days) annual leave including bank holidays.

This is comprised of 4 weeks (20 days) as stipulated under the Working Time Directive, and an additional 1.6 weeks under the Working Time Regulations to account for bank holidays in the UK (8 days a year), amounting to 28 days in total.

Some employers provide staff additional annual leave – but 5.6 weeks is the legal UK minimum inclusive of bank holiday entitlement.

Annual leave continues to accrue during periods of absence including long term sickness and family-related leave.

Bank Holidays

The law makes no distinction between annual leave and bank holidays. There is no specific entitlement to be granted leave on a bank holiday, but contracts of employment may state holiday must be taken on these days, or time off on these days is not to be expected – as per your business needs. Be sure to have this clearly written in your contracts of employment.

Part timers & The Brazel Ruling 2022

In July 2022, the Supreme Court determined that part-year workers should not have their holiday pay pro-rated by the proportion of the year they have worked. Holiday pay can often be a tricky point for employers especially if they have staff with varied working hours, and so it is important to get this right.

In practice there may be two employees on the same number of hours and at the same rate of pay, but those on part-year or term-time working arrangements would receive double the holiday pay as those working each week – a potential scenario which has faced criticism and backlash from many employers since the ruling.

For example:

Employee A

• They are entitled to 5.6 weeks’ holiday

• Their weeks’ pay is 20 x £11, or £220

• They are therefore entitled to £220 a week, or £1,232 per year (£220 x 5.6)

Employee B

• They are also entitled to 5.6 weeks’ which, based on Harpur, is not pro-rated even though they work part of the year

• A weeks’ pay requires you to only look at working weeks over the last 52 weeks, so ignore non-working weeks

• So, a weeks’ pay would be 40 x £11, or £440Th

• Therefore, they are entitled to £440 a week, or £2,464 per year (£440 x 5.6)

There has been a lot of discussion since the recent ruling impacts all casual staff working part of the year.

It is therefore something for all employers to be particularly mindful of, especially for those who may previously have been using the recommended 12.07% approach for part time workers (which has since been withdrawn from guidance).

Given that this is now the final position on the issue for now, employers must ensure compliance, or they risk holiday pay claims from staff. However, (another spanner in the works) there is currently government consultation underway, and if successful, could result in new legislation which provides a return to the 12.07% method of calculation for part-year workers. Therefore, unfortunately as an employer you may feel in a state of confusion in relation to holiday entitlement for any part time or casual workers (trust me you are not alone it is very confusing!)

I will keep you informed of the results of the 2023 consultations, and let you know if the method for calculating holiday pay for part-year workers should be changed – again!

Holiday pay

Annual leave must be paid at the individual’s normal rate of pay. This should take into account the value of any overtime, commission or any other monies that would normally be received. An individual’s pay should never fall below normal levels of pay received due to taking annual leave.

Casual Hours / Bank Staff Entitlements and Calculations

I would highly recommend reviewing the UK Governments guidance page which allows employers to input information about staff to clarify the holiday entitlement, if there is any uncertainty.

Still have questions? Don't hesitate to contact me beeconnectedhr@gmail.com