Calculating annual leave - what hours are included in calculation?

[aa0020]

Hi there

I'd be grateful for any advice. Our employees work different hours each week. One week it could be 30 hours the next 50. There are different hours from day to day (weather dependent). I believe I need to multiple the total hours worked by 12.07% but what hours are included in the total? I presume I add basic and overtime hours but do I include total hours of annual leave (that's how its done in Ireland which is where I am a bit more experienced).

Thanks for any guidance.

 

[Steve Sellers]

I have lifted this answer off my website:

For irregular workers it is far easier to work out their holiday pay using percentages.

The basic legal holiday entitlement of 5.6 weeks is equivalent to 12.07% of the hours worked. The 12.07 per cent figure is:

5.6 weeks holiday / 46.4 weeks (being 52 weeks - 5.6 weeks) multiplied by 100 = 12.07 per cent

The 5.6 weeks is deducted from the year as the employee would not be present in work to accrue holiday during that time. You would then calculate the holiday entitlement by the number of hours worked. For example if an employee had worked 20 hours then they would accrue 145.2 minutes holiday, worked out as follows:

12.07% x 20 hours = 2.42 hours = 145.2 minutes holiday.

 

[Richie N]

What hours are in the contract?
Holiday pay should be calculated on the hours worked if the staff are part time /temporary.

 

[aa0020]

contract refers to start and finish times and that overtime from Mon to Fri is paid at basic rate whilst overtime on a sat and sun is at a premium rate

 

[Richie N]

Contracted hours? not the rate...

 

[Employment Law Clinic]

Hi there

I'd be grateful for any advice. Our employees work different hours each week. One week it could be 30 hours the next 50. There are different hours from day to day (weather dependent). I believe I need to multiple the total hours worked by 12.07% but what hours are included in the total?

If the hours are different each week, you should use the average hours worked in the previous 12 weeks to determine the value of a week's pay when the leave is being taken.


Karl Limpert

 

[Employment Law Clinic]

Hi there

I'd be grateful for any advice. Our employees work different hours each week. One week it could be 30 hours the next 50. There are different hours from day to day (weather dependent). I believe I need to multiple the total hours worked by 12.07% but what hours are included in the total?

For the overtime, is this required or optional work, as that will determine whether it should be counted as part of the average hours?


Karl Limpert

 

[aa0020]

Thanks Karl. Overtime can be either. Sometimes we need them to do it and sometimes they ask for it and it suits us but is not essential. Would you know where I could read up on the appropriate legislation for this.

I did know about averaging the hours over the preceeding 12 weeks but was under the assumption that multiplyng by 12/07% was just as good. My original query concerned what hours are included in this calculation - e.g. paid leave, bank holidays, etc or is it just basic + overtime?

Thanks again for your advice

 

[Employment Law Clinic]

I did know about averaging the hours over the preceeding 12 weeks but was under the assumption that multiplyng by 12/07% was just as good.

Using the 12.07% calculation doesn't always produce the right amount of paid leave at the time the leave is taken; it can mean you overpay as well as underpay.

My original query concerned what hours are included in this calculation - e.g. paid leave, bank holidays, etc or is it just basic + overtime?

No, the paid leave is not included (although it could be argued that it should, as otherwise that could cause complications & discrepancies in the calculation too). Bank holidays could be, depending on what the employment contract says about these. And whether overtime is included is a tricky question (although I would speculate not in this case, as it appears you don't actually require or guarantee regular overtime to be worked): the employee should receive their "normal remuneration", and sections 221-224 of the Employment Rights Act suggest this is the average wage of the previous 12 weeks worked. If the contract states that compulsory overtime is regularly provided, this would be included in the calculation, but not necessarily otherwise.


Apart from the aforementioned law, the case law to consider are the Court of Appeal in Bamsey v Albon Engineering (which suggests that only contractual overtime is included in the calculations) & the potentially conflicting ECJ in Williams v British Airways (which suggests that those who regularly work overtime could argue this is part of their normal remuneration).



Karl Limpert

 

[Steve Sellers]

Using the 12.07% calculation doesn't always produce the right amount of paid leave at the time the leave is taken; it can mean you overpay as well as underpay.

No, but it does negate a claim by a part-time worker that they have received less favourable treatment than a full-time worker where the figure is lower.

The average wage seems to be the ET's favoured method of calculating holiday pay for the purposes of a claim so maybe it is the better method, but it can't be used across the board of course as it would create massive anomalies in the case of seasonal type industries.

 

[PrestonLad]

I have lifted this answer off my website:

For irregular workers it is far easier to work out their holiday pay using percentages.

The basic legal holiday entitlement of 5.6 weeks is equivalent to 12.07% of the hours worked. The 12.07 per cent figure is:

5.6 weeks holiday / 46.4 weeks (being 52 weeks – 5.6 weeks) multiplied by 100 = 12.07 per cent

The 5.6 weeks is deducted from the year as the employee would not be present in work to accrue holiday during that time. You would then calculate the holiday entitlement by the number of hours worked. For example if an employee had worked 20 hours then they would accrue 145.2 minutes holiday, worked out as follows:

12.07% x 20 hours = 2.42 hours = 145.2 minutes holiday.

Perhaps 12.07% is stipulated in some regulations (I'm not a legal expert!) but (and this is the pedantic man in me) are there not 52 weeks plus 1 day in a year?.... or even plus 1.25 days if you add on an average of a quarter of a day per leap year?

If you account to that it reduces the percentage to 12.02%. Not a lot, but...

...

 

[Steve Sellers]

Perhaps 12.07% is stipulated in some regulations (I'm not a legal expert!) but (and this is the pedantic man in me) are there not 52 weeks plus 1 day in a year?.... or even plus 1.25 days if you add on an average of a quarter of a day per leap year?

If you account to that it reduces the percentage to 12.02%. Not a lot, but...

...

Absolutely, that in round about way is my point, there is no one size fits all approach.


Depending on work pattern of an employee, in my opinion, may call for a differing method of calculation. The % system is definitely better for those who work very irregular hours or seasonal type work. More regular hours then the average calculation is more effective and simpler too.

OP this guide gives example calculations, so look for the one that best suits your situation.

 

[aa0020]

I am seriously late in thanking everyone for their advice. Terrific website and great contributors. Thanks again for the help.