Update: is the COVID-19 lockdown affecting your approach to holiday and absence management? Watch our recent webinar on managing absence and holidays during lockdown with guest speaker, HR director and business owner Tracey Hudson:
This is the second part to our guide on how to calculate holiday entitlement. Previously we covered how to calculate holiday entitlement for full-time and part-time workers in days. Here, we'll focus on calculating holiday entitlement in hours for people working set hours or irregular hours.
Calculating holiday entitlement for set hours
If an employee works on an hourly basis instead of full days, it can be more difficult to work out holiday entitlement. For instance, a shift worker may work 4 hours on one day and 6 hours on another. However, it's possible to do this when you calculate by hours worked per year.
As with part time workers who work full days, you start by working out holiday entitlement for full-time employees. The statutory minimum for full-time employees is 5.6 weeks (28 days), which can include bank holidays (paid); also make note of any bank holidays (paid or unpaid) or contractual entitlement you offer on top of this.
How to calculate entitlement in hours
Let's use the statutory amount inclusive of bank holidays as an example. You calculate entitlement by multiplying the number of hours a person works per week by 5.6 (the statutory entitlement).
For instance, someone who works 15 hours a week would have 84 hours of annual leave. You can translate this into 12 days' leave if your full-time working day is 7 hours, or 10.5 days' leave for an 8-hour work day; if you want all leave to be in full days, you cannot legally round down hours, so would need to round up the latter to 11 days.
As another example, say you offer all bank holidays (paid or unpaid) on top of statutory minimum entitlement. That's 36 days per year for full-time workers, or 7.2 weeks (36 ÷ 5). In this case, someone working 15 hours per week can have 108 hours of annual leave.
How to calculate holiday entitlement for irregular hours
Of course, not every person working in hours will have the same set hours each week. Some employees work irregular hours; for example, someone on an annualised hours contract may work more hours at busier times and fewer during quiet periods. Casual and "zero hours" workers often fall within this category.
Calculating holiday entitlement for these workers requires a different approach. In many cases, using the percentage accrual method helps employers work out holiday entitlement for irregular hours employees with the most accuracy possible.
How the percentage accrual method works
The approach to this method is that zero hours workers, for example, accrue statutory holiday at a rate of 12.07% of the hours they work. This is because the standard working year is 46.4 weeks (52 weeks minus 5.6 weeks statutory entitlement) and 5.6 weeks is 12.07% of 46.4 weeks.
With this calculation method method, holiday entitlement is just over 7 minutes for every hour someone works. As an example, if someone has worked 20 hours, the calculation would be as follows:
12.07% (12.07 ÷ 100) x 20 = 2.41 hours (145 minutes)
Please note that this method isn't officially recognised by the Working Time Regulations 1998 (WTR 1998). This is because it doesn't comply with the WTR 1998 in all cases, as a person's working hours can change throughout the year. It's important to review holiday entitlement for workers with irregular hours frequently to ensure it remains accurate.
If you provide more than the statutory amount of holiday entitlement, the percentage you use to calculate equivalent holiday entitlement for variable hours staff will need to be adjusted to ensure fairness and consistency.
Read our support guide on variable hours employees to read more around working out holiday accrual and pay for employees with irregular hours.
Calculating holiday entitlement in hours with HR software
The myhrtoolkit holiday management feature uses Hours Status functionality to determine holiday entitlement for fixed hours (including full-time and part-time) or variable hours, as well as annualised hours. For employees with irregular hours, the system works out a percentage accrual; the system also ensures that variable hours employees cannot accrue more holiday than a full-time employee. The system is a powerful, automated pro rata holiday calculator for your business.
Learn more about managing staff holidays smoothly with HR software
Looking for more guidance on calculating holiday entitlement? Our next holiday calculation guide covers how to calculate holiday for leavers.
Written by Camille Brouard
Camille is a Marketing Executive for myhrtoolkit whose writing interests include HR technology, workplace culture, leave management, diversity, and mental health at work.