With so many different types of contracts of employment available to employees (e.g. zero hours, annualised, casual etc.) working out annual leave entitlement can be a trying situation.
As a rule of thumb, holiday calculations for staff with irregular hours is calculated on a 12 weeks reference period. However, it is useful to know that this will increase to a 52 weeks reference period in April 2020.
We first need to establish what should be included in 12 weeks holiday calculation. This should be a working week basic pay, commission and overtime. There has been various employment cases to support this. In Lock v British Gas, the outcome confirmed regular commission should be included when calculating holiday pay (however this does not apply to the 8 bank holidays).
Similarly the outcome to Bear Scotland v Fulton, also confirmed regular overtime must be included when calculating holiday pay. The key word here is ‘regular'. If overtime and commission is on an infrequent basis, then this would not apply.
Historically, the use of 12.07% calculation has now come to an end due to Brazel v The Harpur Trust (2018) case where the EAT concluded the 12 weeks average now supersedes the 12.07% practice. The decision has been appealed and will be a heard in the Court of Appeal in May 2019.
HOLIDAY ENTITLEMENT CALCULATOR
At Quest Cover they follow the below calculation to work out how much holiday is owed to the employee.
How much annual leave is an employee entitled to over a 12 weeks average?
- Total hours worked/12 weeks = gives the average working week.
- Total cash (including regular commission and overtime) added over 12 weeks/ 12 weeks = average weekly pay
- Average weekly pay/average working week = average hourly pay per week
- Average working week/5 days = hours per day x average hourly pay = holiday pay for 1 day
Here is a worked example.
Over last 12 weeks, worked total of 412 hours (including overtime /bonus /commission) and over the 12 weeks earned £2781 gross and decides to take 1 day off, then holiday pay will be :-
412 hours divided by 12= 34.33hours
£2781 divided by 412= £6.75 per hour
34.33 hours per week, divided by the working days in the week(5days)= 6.87 hours per day
Therefore 6.87hours x £6.75= £46.38 holiday pay for 1 day
Average working week is 34.33
34.33 x 5.6 =192.25 hours per pa
192.25/52 weeks =3.69 hours
3.69 x 12 =44.28 hours accrued holidays pay
Should you require any further assistance regarding holiday pay average, please contact the BALI's HR & HS service provider Quest Cover helpline.
Article sourced from Quest Cover.