How to calculate holiday entitlement in hours | myhrtoolkit

This guide to calculating holiday entitlement in hours has been checked and approved by Matthew Ainscough, Head of Employment Law at Taylor & Emmet Solicitors. The guide was last updated on 20th November 2020.

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, using a simple holiday hours calculator method.

Calculating holiday entitlement for set hours

It can be more difficult to work out holiday entitlement based on hours worked instead of full days. For instance, a shift worker may work 4 hours on one day and 6 hours on another. However, it's possible to work out holiday entitlement in hours 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 per year (28 days), which can include bank holidays (paid); also make note of any bank holidays (paid or unpaid) or contractual holiday entitlement you offer on top of this.

How to calculate holiday 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 annual 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 hours 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, 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 prescribed by the Working Time Regulations 1998 (WTR 1998). Therefore, it won'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. In particular, this method of calculation is not suitable for “part-year workers” following the Court of Appeal’s decision in the case of Harpur Trust v Brazel. You can read more about this in our article on potential changes to holiday entitlement calculations for casual workers.

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 and to avoid allegations of discrimination or breaching the Part Time Workers Regulations.

Read our support guide on variable hours employees to read more around working out holiday accrual and pay for employees with irregular hours. To find out more about casual/zero hours workers, see our guide to calculating holiday entitlement for casual and zero hours workers.

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.

Looking for more guidance on calculating holiday entitlement? Our next holiday calculation guide covers how to calculate holiday for leavers.