How do you get round the problem of leave calculation for temps?

How do you get round the problem of leave...

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 I have a temping agency aS client. I need some advice from oher accountants with similar experience. It's to do with the calculation of the holiday pay for those temps. Temps work irregular hours and days per week. According to the guidance from REC and business link, hours worked into the holiday year are divided by the number of days they worked into the hol year to arrive at average hours per day, this figure is then used to caculate days accrued. The practical problem with this is to do with counting the number of days because that requires reviewing all timesheets in their hol year (it's like a humongous task and extremely time consuming). Another way of course (more simplified and practical to use) is to calculate leave entitlement in hours but the client (or some temps do not want that). The client is telling me that we need to sort this out because on a couple of occassions temp has complained to the client's customer about incorrect leave paid (the reason is we used a 5-day working week assumption to get round the problem described above, whcih obviously gives lower average no. of hours per day for part timers temps and for temps that do work very long hours). I should be extremely grateful if anyone had this before and how it was sorted or any insight how other agenciesw get round this issue. Please note that we don't use any sophiticated temps software, a basic payroll software (payroll manager). Many thanks.

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By annelavinia
05th May 2011 11:23

Calculation of Leave Entitlement

We have a number of time-sheeted people who work irregular hours, plus staff who are contracted to work a cycle of different-length days. We have found that the only way we can keep track of holiday (and also not risk unequal treatment of such staff) is to work on an hourly calculation. So for every 9.3 hours an hourly paid time-sheeted employee works they accrue an hour's holiday.  It can be quite painful to calculate, so we include the calculation on the timesheet, for the employee to complete, and we check it and record it. Laborious, but can't think of a better way. Why does your client not want you to work out holiday on an hourly basis?

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By martin.curtis
05th May 2011 11:48

Have a look at the ACAS guidelines for irregular hours

We use the calculation in the ACAS guidelines Holidays and Holiday Pay - page 6, I have attached a link at the bottom.

To calculate the number of hours worked we simply take the amount paid during the period in question divided by the hourly rate

To calculate the holiday accrued we take the hours worked and multiply it by 12.07% All of our part-time workers are only due the statutory minimum 5.6 weeks holiday per year.

The resulting figure is multiplied by the hourly rate to discover the amount of holiday pay due. 

Of course if all hours have been paid at the same rate and there is no 'working time' issue the answer can be arrived at quicker by multiplying the amount  paid during the holiday year by 12.07%

Hope this helps

Martin

http://www.acas.org.uk/CHttpHandler.ashx?id=955&p=0

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Tom McClelland
By TomMcClelland
11th May 2011 11:36

The problem is caused by the insistance on "days" for employees

If you have employees who work variable or casual hours then to insist on them having a number of days of holiday entitlement doesn't make sense. The correct approach is to add up hours worked and multiply by the c. 12.1% accrual rate, which gives entitled holiday hours, which are then paid at the weighted average of hourly rate for that employee over the previous 12 weeks work. Specifying how many days that is really tells no-one anything.

I imagine Moneysoft may even have reports and holiday pay payment operations that will help you do all of this. There are certainly other budget payroll solutions (insert sunglasses smiley here) which will show accrued and paid holiday hours on payslips, as well as keeping track of the holiday hours accrual per employee for you.

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By nkwayne
11th May 2011 13:12

This is a real pain in the...

Yes, I have a client with similar problems.  Irregular shift patterns, etc etc.  I spent many hours devising a spreadsheet to record hours and days worked, 12 week previous average rates, accrued and taken holiday and so forth.  And it needs careful scrutiny for mid-year starters and leavers, too, averages easily get screwed up under those circumstances.

Guidance for your client is - this is the law we have no option, we have to follow it.  If that means telling employees that their holiday pay entitlement can only be measured in hours then so be it.   

Dont forget that there are 2 parts to this issue.  Law states that your employees are entitled to 5.6 weeks of paid absence.  The 2 parts are that they are entitled to 5.6 weeks of absence, and 5.6 weeks of pay.  How much you pay, and when, and how much time off they have had, is a complex matrix to manage.  Your client needs to bring in systems which record actual hours worked, actual days worked.   And remember too that this is an opportunity for you to help your client bring better systems into place and charge them for it. 

Good luck

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