Calculating holiday entitlement for new starters | HR blog

Senior employment lawyer Matthew Ainscough of Bell & Buxton incorporating Ironmonger Curtis outlines the general rules around annual leave entitlement and how to calculate holiday entitlement for new starters accurately and fairly within a range of scenarios.

The right to annual leave under the Working Time Regulations 1998 (WTR 1998) is as follows:

• A worker is entitled to 5.6 weeks' annual leave in each leave year. This is equivalent to 28 days for those who work five days a week.
• A worker cannot be entitled to more than 28 days' statutory leave in a single leave year.
• A part-time worker is entitled to 28 days' holiday reduced pro rata, according to the number of days they work each week. This can still be expressed as 5.6 weeks' leave.
• No minimum period of continuous service is required to qualify for statutory annual leave.
• A worker whose employment begins part way through a leave year has a pro rata statutory holiday entitlement for that year.

The government has created a holiday entitlement calculator, which can calculate holiday entitlement in days or hours. It is particularly useful for calculating the holiday entitlement of part time workers, casual workers, and those working irregular hours. It also usefully allows the calculation of holiday during part-years of employment (the first and last years).

The leave year

Under the WTR 1998, a leave year commences on the date set out in a relevant agreement, such as a contract of employment, a staff handbook, or a collective agreement.

If the leave year is not specified in a relevant agreement, the WTR 1998 provides the following default position:

• For workers who were already employed on 1 October 1998, the leave year begins on 1 October each year.
• For workers who started after 1 October 1998, the leave year begins on the date their employment commenced and each anniversary of that date.

The first year of employment

Where a worker starts work part-way through the employer's leave year, the WTR 1998 provides that:

• Leave entitlement for the remainder of the leave year in which employment starts should be calculated on a pro rata basis.
• During the first year of employment (not just the remainder of the initial leave year), the amount of the leave entitlement that the worker can take is governed by the "accrual" provisions. Leave accrues at the rate of 1/12 of a full year's entitlement at the beginning of each month.
• When calculating accrued holiday entitlement, if the amount of leave accrued includes a fraction of a day other than a half, this fraction should be rounded up to a half-day (if it is less than a half-day) and to a whole day (if it is more than a half-day).

Learn more: Holiday accrual guide: how to work out holiday accrual

The idea behind these accrual provisions in the first year of employment is that they will control the taking of leave by new workers, although an employer is able to delay an employee taking holiday until later in the year, whether or not the holiday entitlement has been accrued, so there is a view that these provisions are not really necessary.

Calculating entitlement for a new starter: examples

So, let’s look at some worked examples of how annual leave might be calculated for a new starter.

Example 1

Let’s imagine a worker who works 5-days a week has commenced employment 3 months into the leave year and their holiday entitlement is 28 days.

• 28 / 12 x 9 remaining months = 21 days leave

The calculation is 20.9 so this is rounded up to 21 days. As mentioned above, for every month that an employee works, they accrue 1/12th of their holiday entitlement.

Example 2

Let’s look at another example. A worker who works 5 days a week has been in employment for 6 months and their holiday entitlement is 28 days.

• 28 days / 12 x 6 = 14 days leave

Whether calculating holiday entitlement for new starters or leavers, the process is a relatively simple one. It can be calculated monthly as above, or by the actual or working days remaining in the holiday year.

Example 3

To calculate holiday by the actual days in a year simply work out the number of days between an employee’s start date and the end of the year. Then divide this number by 365.

So for example, if an employee commences employment on 1st September, there are 121 days between their start date and 31st December (assuming the holiday year runs from January to December).
Therefore, the employer would divide 121 by 365 and multiply this by 100 to arrive at the percentage of full holiday allowance the employee is entitled to.

• 121 / 365 = 0.33 x 100 = 33%

If the annual holiday entitlement is 28 days, this employee’s entitlement is 33% of 28 days, which is 9.24 days. As mentioned above, an employer cannot round down the leave. Therefore 9.24 should be rounded up to 9.5 days.

Example 4

Alternatively, it can be calculated by the number of days an employee actually works in a year (i.e. 260 days). Simply work out the number of working days between an employee’s start date and the end of the year and then divide this number by 260.

If an employee starts on October 1st, there are 64 working days (excluding weekends and two bank holidays). Divide 64 by 260 and multiply by 100 to arrive at the percentage of full holiday allowance for this employee.

• 64 / 260 = 0.25 x 100 = 25%

If the employee is entitled to 28 days leave, this employee would be entitled to 25% of 28 days, which is 7 days.

Calculating holiday entitlement for new starters automatically

An HR software system can make it much easier to calculate holiday entitlement quickly and accurately for a variety of employees, including those who are starting or leaving partway through your leave year.

Calculate annual leave and update entitlements easily with holiday management software

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