The recent Supreme Court judgment in Harpur Trust v Brazel now means that employers can no longer use the 12.07% method to calculate holiday entitlement or holiday pay for workers on zero hour contracts or similar workers.
Such workers are entitled to a statutory 5.6 weeks of leave and holiday pay should be calculated as the average pay received over the previous 52 weeks in which work was done.
We have now updated how we calculate Holiday Entitlement and Holiday Pay to reflect this change.
Now for the tricky bit! our calculations.
Worked Example
In this example we will take an employee whose average weekly hours is 20 (working 5 hours per day, 4 days per week).
The company's holiday year starts on 1st April and it is now 5th August.
Calculating Holiday Accruals
Step 1 - Calculating the Proportion of the year gone
Proportion of year gone = Number Of Days Since Start Of Holiday Year / Number Of Days In The Year (365 or 366 if leap year)
Number Of Days Since Start Of Holiday Year (1st April) to 5th August = 126 days
Therefore the Proportion of Year Gone is 126 /365 = 0.345 (34.5%)
Step 2 - Calculating an Employee's Annual Holiday Entitlement
Annual Holiday Entitlement = Average Weekly Hours x UK Statutory Holiday Entitlement (5.6 Weeks).
Following the worked example:
Annual Holiday Entitlement is 20 hours per week x 5.6 weeks = 112 Hours (22.4 days)
Step 3 - Calculating an Employees Accrued Annual Leave Hours on 5th August
Accrued Annual Leave Hours = Proportion of Year Gone (Step 1) x Annual Holiday Entitlement (Step 2)
Accrued Annual Leave Hours on 5th August = 0.345 x 112 hours = 38.64 hours (7.7 days)
In Summary
An employee working an average of 20 hours per week since the beginning of the holiday year (1st April) will have accrued 38.64 hours (7.7 days) holiday pay by 5th August.
Please Note: Your payroll system will be the ultimate source of data for worked hours and annual leave. The data on our system should be used as a guide only as a close approximation to assist with operational decisions. These features assume that the data from our Time and Attendance product is submitted to your payroll software without any changes. However changes can occur outside of Gig Grafter and you may see some discrepancies in the data. These can be corrected by updating employee opening balances.