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Do you have workers without fixed hours or pay? Our handy list of top tips will make holiday pay calculations easy for workers without fixed hours or pay…

All workers (except self-employed) are entitled to at least 5.6 weeks of holiday pay per year (Working Time Regulations 1998).

  • 4 weeks of this is part of the EU directive. These 4 weeks must be taken in the leave year of which it is accrued.
  • An extra 1.6 weeks are given to UK workers.

Holiday pay entitlement can be rounded up but it cannot be rounded down.

  • This doesn’t mean you have to round up to full or half days. An employer can ask an employee to complete part of a shift and either come in to work or finish early.

The pay a worker receives while they are on holiday should reflect the pay they would have earned if they had been at work.

  • This is done by calculating the workers average pay over the ‘holiday reference period’

Normally the ‘holiday reference period’ is the previous 12 weeks pay (known as the holiday reference period).

  • For employees not paid on a weekly basis the 12-week reference period ends on the Saturday before the holiday period. This means that for monthly paid workers it is not as simple as looking at the previous 3 months pay as for most of the time this won’t match the correct holiday reference period.
  • Government guidance suggests that if you don’t have a 12-week holiday reference period that using the maximum of whole weeks of pay periods as a representation is fair although there is no legislation to confirm this.
  • For casual workers with no normal hours the reference period must look back at their 12 weeks for which they were actually paid so may in fact look back over a longer pay period than 12 weeks. Only weeks where no pay was received (or only holiday pay processed) should be excluded.

From April 2020 there is legislation to change the reference period to 52 weeks in order to even out any seasonal variation in pay seen in a number of casual workers.

Holiday pay needs to be based on ‘normal renumeration’ as to not be deterred from taking holidays.

  • This means that any payments normally received including bonus / commission / regular overtime or allowances. It does not include any payment for expenses which would not occur when the worker is not at work. Technically the 1.6 weeks of holiday pay UK employers must pay its workers above the EU minimum of 4 weeks does not have to be paid to reflect normal renumeration. However, most employers will use the same calculation means.

The only time an employee can be paid for holiday pay when they have not taken leave is when they have left employment.

  • This is known as payment in lieu. At this point all statutory holiday entitlement must be paid out, and any contractual holiday pay should be paid out if stated in the contract of employment.

An employer can choose to carry over unused holiday entitlement above the EU directive of 4 weeks annual leave. They are not required to do so.

  • There are exceptions. If an employee is unable to take annual leave due to sickness or maternity leave, holiday entitlement must be rolled over into the next holiday year.

If an employee is ill during a period of annual leave they can ask to convert the period of holiday to sick leave allowing them to take their annual leave at a later date.

If you would like to review your holiday pay accrual get in touch with us.