An area of your business which may need some clarification is when you are calculating holiday entitlement of your employees.

An important thing to note is that employees cannot be paid “holiday pay” on top of normal pay. Instead, holiday has to actually be taken off work. In effect, the employee is effectively paid as normal (rather than “holiday pay”) when they are not working.

Calculating the holiday entitlement of salaried employees is simple. Take the legal minimum of 5.6 weeks holiday, work that out in terms of days (e.g. 5 day week = 28 days) and track when your employees take their holidays. Please note that the 28 days is inclusive of bank holidays.

For hourly or daily paid employees, the holiday accrues each time they work OR take holiday. So every time someone is paid one hour (whether due to working, sick pay or being on holiday), they accrue an extra 0.1077 hours of holiday pay (5.6/52). So if someone is paid for 30 hours at the end of a week, they will have 3.23 hours added to their holiday entitlement. Then, each time they take some holiday (get paid hours on their payslip even though they didn’t work), there is a deduction from their holiday entitlement.

It is a legal requirement that employees take their holidays. However, in the case of someone working flexible hours, “taking holiday” just means being paid some hours when they are “on holiday” in addition to being paid for the hours they have actually worked.