Buying and selling holidays is a great way for employees to increase their holiday allowance or increase the money in their pocket!
Buying and selling holidays falls under salary sacrifice meaning that employees can save on their tax and national insurance by doing so. Also saving employers national insurance contributions, everyone’s a winner!
It is advisable to employers to ensure that holidays are bought or sold before the start of the new holiday year. Employers should also put a limit on the number of holidays that employees can buy and sell! It is also worth noting that as an employer you are responsible for ensuring that employees take their annual leave. Employees must take as a minimum 4 weeks of holiday throughout the year.
Why Offer the Scheme?
This scheme has been proven to boost morale within a workplace and reduce absenteeism by giving employees the opportunity to have more days away from work to spend on their hobbies, holidays, events and their families for example. Also improving the overall well being of your workforce as it means that those who buy extra holidays but do not use them can receive additional wages.
This scheme can help save money for businesses, as a reduction in employee’s salary lowers the amount of employer’s national insurance. Furthermore, this scheme also encourages employees to better plan their holidays meaning that as a business it is easier to plan resources and time. As well as this it will mean a boost in company reputation as you are seen as an employer that offers perks and benefits and not only cares for their employees in a working environment, but also in their personal lives.
Salary sacrifice holiday schemes can be applied to any employees regardless of their working pattern.
Here’s an example on how to calculate how much should be deduced or added to an employees salary…
First work out what the employee’s day rate is:
Full time workers:
5 days per week X 52 weeks = 260 days working days per year
Divide the employee salary by 260 to get their day rate.
For example, for an employee who earns £20,000 per annum the calculation would be as follows:
5 days x 52 weeks = 260 days. £20,000/260= £76.92 per day
Part time workers:
In this case multiply the amount of days per week by 52, then divide by the employees yearly salary by this amount to calculate the part time day rate.
Secondly, you will now need to multiply the day rate by how many additional days holiday the employee would like to buy or sell and then divide this by 12 to spread the cost over the holiday year within their payroll:
For example, if an employee’s day rate is £76.92 per day and they wish to buy 3 days, their salary would be reduced by £230.76 per year. This equates to a reduction in salary each month of £19.23 per month.