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calculating holiday entitlement on leaving

calculating holiday entitlement on leaving

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I'm having one of those moments when you thought you'd got it all sussed - then someone askes the question............

Our company's holiday entitlement (full time, 5 days per week) is 24 days per year (Jan-Dec)+ statutory bank holidays (usually 8) - so we meet the annual minimum of 28 days ok. The current senario is we have an employee leaving at the end of May, he has taken 4 days, booked holiday, plus there has already been 4 paid bank holidays. How would you calculate his holiday pay (for untaken, accued holiday) that is due to him on leaving. Surely bank holidays arent normally accrued - you either pay them or not according to your employee contract/hand book ?

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Euan's picture
By Euan MacLennan
25th May 2012 10:11

It depends ...

... as you say, on your terms of employment.

As you specify bank holidays separately, the accrued holiday is based on the 24 days of voluntary holidays.  The accrued holiday pay entitlement (to be paid subject to PAYE, of course) in this case is 6 (24x5/12 - 4 taken).

If you had specified 32 days of holiday in total, in line with the statutory rule, the accrued holiday would be 5.33 (32x5/12 - 8 taken).

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By cathyaavs
25th May 2012 10:28

many thanks, that is how I had been doing it for yonks, but somebody put a spanner in the works recently.....................

I think it stems from this person seeing that, as the statutory minimum is stated as 28 days that the holiday accrual process should always be based on this 28 days per year, that is 2.33 days per month - hence my confusion as then surely this would mean having to take into account (as in our case) an element of the bank holidays included in the statutory minimum.

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By Tonykelly
25th May 2012 16:43

should be based on full holiday entitlement

in this case, the person is entitled to 32 days holiday.

I am not counting the extra holiday this year as they are leaving end of May.

So any accrued holiday pay should be based on 32 days.

Note: You can never base it on 24, as the legal minimum is 28.

 

 

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By cathyaavs
25th May 2012 16:52

Ok, now I've got two conflicting answers...........................

if tonykelly is right then I should be taking into account the 4 bank holidays he's already been paid for + the 4 days booked and paid for.

So he would be worse off.......

he would have accrued 5 x 32/12 = 13.5 (approx), then take off 8 days (B/H + hols) then he would only be entitled to 5.5 days on leaving..................??

any others with ideas...............please

 

 

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By Tonykelly
25th May 2012 17:16

why are you complicating something very simple?

Listen, they are entitled to 32 days annual leave, so just base your calculation on that.

Simple query, simple solution.

 

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By cathyaavs
28th May 2012 09:38

"Listen, they are entitled to

"Listen, they are entitled to 32 days annual leave, so just base your calculation on that.

Simple query, simple solution"

is there any official documentation or the such that you know of (can point me to) so that i can refer to something. I'm sorry, tonykelly, but I've been in many situations where people (yes, even accountants) have answered a question from me with the "look, I know I'm right, just accept it.......ok" - and me being just a "simple minded" bookkeeper have done so, only to find out later that the information I was given IS NOT correct !!!!

If anyone else knows (can confirm) whichever method is right.....I'd really like to hear, Thanks !

 

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Replying to DJKL:
By Tonykelly
28th May 2012 10:01

there is

cathyaavs wrote:

is there any official documentation or the such that you know of (can point me to) so that i can refer to something.

It's called a contract of employment. It should state the following words:

"Your employee is entitled to 32 days annual holiday".

see also

http://www.direct.gov.uk/en/employment/employees/timeoffandholidays/dg_1...

 

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Replying to Lucy2016:
Euan's picture
By Euan MacLennan
28th May 2012 10:18

Tony Kelly, I think you are missing the point

Tonykelly wrote:

It's called a contract of employment. It should state the following words:

"Your employee is entitled to 32 days annual holiday".

 

Whatever you may think it "should" state, what it actually states, according to the OP, is "Our company's holiday entitlement (full time, 5 days per week) is 24 days per year (Jan-Dec)+ statutory bank holidays".  Hence, the calculation in the first paragraph of my original answer.  We are well aware that the statutory minimum is expressed in terms of a combined total for both voluntary and bank holidays.

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By Tonykelly
29th May 2012 09:58

I am aware of the scenario in the question

24 days + bank holidays = 32 days.

refer to the link I gave above for help with calculation.

If you calculate based on 32 days, you will get consistent results for all your staff regardless of when they actually leave.

 

 

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By Democratus
29th May 2012 11:20

There are no statutory bank holidays in the WTD

it's 5.4 weeks mimimum - no mention of statutory, bank or other type. Euan is right the holiday entitlement must be compliant with the wtd.

 

The entitlement here is dependant on what is meant by "statutory bank holidays". This is open to interpretation and indeed geographic variations apply.

 

If it's 8 as the OP states then the calculation is

24x5/12 = 10 days

Less any "non stats" taken. let's say it's 4 for argument

Then it's 6 days as Euan has stated

 

If any of the 4 days were "stat days" then these are not deducted in this scenario and the days in lieu increases.

 

 

 

 

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By Tonykelly
29th May 2012 16:09

legal advice

I have spoken to my legal adviser on this matter, as there appears to be some confusion as to the correct method.

I have been advised that the correct method is to base the calculation on the full holiday entitlement, in this case 32 days.

To use any other method would be contrary to the Working Time Regulations 1998 and also would give erroneous and inconsistent results depending on when someone left ie before or after bank holidays etc.

For further details etc. please refer to the ACAS leaflet on holiday pay - see link in my previous posting.

 

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By Democratus
29th May 2012 17:26

Tony

Legal advisors will nearly always recommend the safest course but not always the best, particularly when matters stray into the wierd world of HR. (IMHO)

What turned out to be a simple question has once again proved to have some complications.

Perfect for AWeb Any Answers. Not sure we are really helping Cathyaavs though.

Edit my above response; it's 5.6 weeks which for a 5 day week equates to 28 days, normally (incorrectly) seen as 4 weeks plus 8 stats. (too fast on the keyboard before brain is engaged)

Workers are entitled to 5.6 weeks irrespective of type of day, but if the company policy states a ceratin number of flexible and certain other fixed days the the flexible days are pro rata calculated and any fixed only relevant if they fall within the notice period.

 

 

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By tom123
29th May 2012 21:52

This is what I enjoy about Aweb.

Having always calculated holiday entitlement as pro rata on the 'normal' holidays, I have never had anyone expect an accrual for bank holidays 'earned' but not taken. (eg for employees who work between September and November),

 

Indeed it has never occured to me to consider that.

 

After all, if someone starts work immediately prior to a bank holiday, they get paid the full amount.

 

Now, how to calculate bank holiday pay for part time workers - who work all day on Monday, Wednesday and Friday, - that would be a whole different thread :)

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By cathyaavs
30th May 2012 10:08

thanks all - I have been reading all your replies with interest and as Democratus has stated its just compounded my confusion. Speaking of compounding the confusion we have another employee leaving mid June who has taken quite a lot of holiday and I know him to be, how shall we say, "exacting"?

in his situation it makes a big difference depending on the method used and in all seriousness I dont think hes expecting anything to be deducted for excess holidays (he leaves on 15/6, has taken 10.5 days, own booked, plus there is/will be 6 bank hols paid when he leaves). depending on the method he could leave with anything from a 0.5 days paid to him, or end up having up to approx 3 days overpaid holiday deducted..........I'm hoping you can see my predicament here. if he doesnt agree with whats on his payslip, he will expect a detailed explanation backed up with proof, which I obviously need to be able to validate............

(we do have a clause in the emp. contract which states that overpaid holiday will be deducted on leaving)

I have seen references (on various sources) to employees taking their employers to a tribunal for incorrect pay on leaving which has included errors in the calculation of their hol pay. For the powers to be able to make a decision on whether to uphold the complaint, or not, they must be able to refer to some kind of "statutory" dos / donts ???

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By ShirleyM
30th May 2012 10:30

Unless they are on an astronomical salary

Why not calculate using both methods, and give them whichever method gives the best result for them. There can be no argument from any leavers then, even if you do change the method for different leavers.

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By Meerkat
01st Jun 2012 12:06

to add more confusion!

My husband works in the public sector.

He is entitled to 30 days annual leave each year (plus bank holidays).

He has handed in his notice and will be leaving on 30th June.

Their annual leave year is from 1st January to 31st December.

I calculated he would be entitled to 15 days annual leave for the 6 months he is employed............

..........but no!  Their calculations are that he can have 13 days.

Does this happen anywhere else other than the public sector?!

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By cathyaavs
01st Jun 2012 12:34

ShirleyM - I do understand where you're coming from but, I think most people would agree that you have to be consistent - even if it means that some employees are going to be upset if they don't like the end result.........................

But Meerkat - how on earth do they get to that, 13days ? I would certainly ask them to give a detailed breakdown of how they arrive at that !!

I just so amazed that, as some have said, that there doesnt appear to be any "definitive" answer - everything seems to be open to interpretation (which seems even more ridiculous seeing as an employee can take his employer to a tribunal if he doesnt agree with how its been calculated......CRAZY)!!!!!!!!

 

 

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By Lees
01st Jun 2012 13:03

civil service

Regarding the CS - although the leave year is Jan to Dec for statutory leave (this includes any privilege days, of which their can be quite a few!), the leave year can vary between departments and persons. For example, once upon a time, the DSS based the holiday leave year around the employees birthday, then in DWP they tried to move everyone on to a standard leave year end which I believe is currently 30 November. I do know that other departments differ so it may be worth checking.

Also, re calculating leave, what I am curious about is how to treat the 'extra' Bank Holiday. As a payroll clerk (amongst other things) I use the 28 days inclusive, but from the arguments I have seen above, there may be an argument to allow 9 days as Statutory Leave, depending on how it is worded in the contracts. Sorry if this is misleading - this is my first AWeb blog!

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By tom123
01st Jun 2012 13:04

Individual holiday years

A friend who worked for the Inland Revenue had a holiday year that started and ended on his own birthday - you really couldn't make that up..

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By Chris Wise
01st Jun 2012 14:14

Civil Service Leave

When i left a million years ago the HR bod mentioned that the CS assumed every month had 31 days, which doesn't help, but if the rule has changed and they assume every month has 28 days you get to 13 and a bit days.

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By neileg
01st Jun 2012 15:26

Confusion

 Tony K is almost there. But you need to remember that the working time directive only establishes minimum entitlement not a universal formula.

Part of the problem here is that many people think of bank holidays as a statutory right. Whether you call them bank holidays, public holidays or even statutory bank holidays, they aren’t. Entitlement to leave is decided by the contract of employment which may or may not be expressed in terms of bank holidays. The working time directive doesn’t deal with bank holidays, just total leave entitlement. That’s why you need to include bank holidays in both the entitlement and the leave taken when calculating minimum holiday pay on termination of a contract.

Where the contract has more generous provisions than the WTD minimum, then excluding bank holidays may always produce an answer than exceeds the WTD requirement in which case that’s allowed. 

And yes there are different leave year practices around. Some employers use calendar year, financial year or some other fixed year. Some have personal leave years that start and end on the employee birthday or the anniversary of starting work. Some even allocate a personal leave year on a rota basis. These odd sounding bases are used to avoid the peaks and troughs of leave taking that occur around the start/end of a fixed company leave year.

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By philh74a
01st Jun 2012 16:53

Statutory Holiday Entitilement

Very interesting discussion.

My take on it is this. Looking here on the Government site http://www.direct.gov.uk/en/Employment/Employees/Timeoffandholidays/DG_10034711 it states the following :

"When you leave your job

When you leave a job you can take the statutory holiday entitlement that you have accrued up to the time you leave during your notice period, as long as you give the right notice and your employer agrees.

You also have the right to be paid for any untaken statutory holiday entitlement that you have accrued.

If you have taken more leave than your accrued entitlement, your employer shouldn't take money from your final pay unless it's been agreed beforehand. Check your contract to see if there's any such agreement. "

On http://www.direct.gov.uk/en/Employment/Employees/Timeoffandholidays/DG_10034642 it states "Bank and public holidays can be included as part of your minimum 5.6 weeks' holiday entitlement."

In my logic, this would mean that it must be based on the 28 days statutory entitlement / 12 months = 2.33 per month. Also, the holiday taken should be made up of Normal Holiday Entitlement taken and the Bank Holidays taken to date.

This Business Link tool appears to back up the 28 day entitlement if you put some figures in for a leaver. http://www.businesslink.gov.uk/bdotg/action/layer?r.l1=1073858787&r.l2=1084822795&r.s=tl&topicId=1079427399

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By jndavs
06th Jun 2012 13:23

Accruing holidays
This discussion seems to boil down to what we mean by accrue.

Given the wording of the original post, a common sense approach would be to time apportion the 24 days and treat the bank holidays as accruing as and when they fall, but since when has anything been on a sensible basis?

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By Sunshine13
14th Jan 2014 18:46

Please help

My employer's annual leave year is Jan to December. I am entitled to 34 days of annual leave. I will be leaving my job by the end of March 2014 and I have curently taken a leave of absence for 2 months. I was told that while on this special leave I still accrue my paid leave. My question is how many days of annual leave would I accrue by 31 March 2014? It is important for me to know as I want to resign and include my paid leave days in the notice period. Would appreciate if someone could respond please/

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