A Guide to Calculating Annual Leave Pro-Rata

---

Annual leave – also referred to as holiday entitlement or statutory leave entitlement – is a specific period of paid time off granted to employees. However, leave entitlement can vary based on organisation, industry and job type. Calculating allowances can get tricky for certain types of workers, especially those on flexible working conditions or part-time.

In the UK, annual leave is a legal requirement, and a worker’s entitlement is calculated on a pro-rata basis. This means employees who work part time, start or leave a job during the year will receive the same rate of annual leave as full-time colleagues and those who worked consecutively throughout the year.

This helpful guide will arm employers with all the information you need to calculate annual leave entitlement and navigate any legal requirements too.

Who is Entitled to Annual Leave?

Anyone classed as a worker is legally entitled to annual leave. It is vital that employers calculate annual leave accurately, so their legal obligations are met. The following people are entitled to annual leave:

• full-time workers
• part-time workers
• agency workers
• workers on zero hours contracts

Employees from all these categories are entitled to annual leave and calculations are made on a pro-rata basis.

Annual Leave Calculations – How Much Are You Entitled to?

Full-time workers are legally entitled to 5.6 weeks of annual leave.

For a full-time employee following a 5-day working week, this equates to exactly 28 days.

The formula used to reach this annual leave entitlement is:

Number of working days per week x 5.6 = annual leave entitlement.

It is worth noting the 5.6 weeks of statutory annual leave can include bank holidays and public holidays and is ultimately at the discretion of the employer. Similarly, an employer may also grant a person more than the statutory 5.6 weeks of annual leave, and this should be clearly set out in the employee’s contract.

Calculating Annual Leave Pro Rata for Part-Time Employees

Like full-time employees, part-time employees are also entitled to 5.6 weeks of annual leave from their employer. The difference is that holiday calculations for part-time staff are made on a pro-rata basis.

Take the example of a part-time employee working three days a week. To calculate their annual leave, an employer would use this formula:

3 [number of working days per week] x 5.6 = 16.8 days annual leave entitlement pro rata.

On that basis, a part-time employee working two days per week would be entitled to 11.2 days of annual holiday pro rata. Or:

2 x 5.6 = 11.2 days.

What if employees have complex working patterns?

Where an employee works a changeable and complex working pattern it may be better to manage their entitlement in hours for greater accuracy.

For example, if full-time staff work a regular 37.5-hour, five-day week, and an employee wants to move to a reduced 20-hour week, you would make the following calculations:

Full-time annual leave entitlement = 28 days, or 210 hours.

210 hours ÷ 37.5 hours x 20 hours = 112 hours.

Here, 112 hours is the pro-rata equivalent to 5.6 weeks of annual leave.

Companies who process annual leave in days rather than hours should follow this rule:

Full-time annual leave entitlement = 28 days.

28 days ÷ 5 days (full-time working days) x 4 days (new weekly working pattern) = 22.5 days’ annual leave entitlement.

This is also the pro-rata equivalent of 5.6 weeks of annual leave.

The Part-time Workers Regulations 2000 was established to ensure part-time employees are not treated less favourably than full-time employees, including where annual leave entitlement is concerned. It is therefore essential that all companies make accurate holiday leave calculations to avoid conflict with employees and the potential for tribunals.

Calculating Annual Leave Pro Rata for Zero Hours Contract Employees

All employees – including those on zero hours or variable hours like seasonal workers – are entitled to 5.6 weeks paid annual leave every year. In essence, statutory holiday entitlement for those working irregular hours is the same as every other employee.

Calculating annual leave entitlement for zero-hours employees may seem tricky because they may not work a fixed number of hours or days a week. However, you can work out their entitlement by making your holiday calculations in hours rather than days.

Therefore, annual leave entitlement for zero or variable-hours workers should be based on their average weekly earnings over the previous 52 weeks, counting only those weeks in which they were paid rather than 52 consecutive weeks.

Employers can use pay data from the past two years, or 104 weeks, to obtain the information they need to make their calculations. Where 52 weeks’ data isn’t available, calculations are based on the number of weeks of data that can be found.

This new method for calculating annual leave for irregular hours employees replaced the outdated formula: [Number of hours worked] x 12.07% = holiday allowance. Here, 5.6 out of the 52 weeks equals 12.07%, but the UK Supreme Court ruled this formula should no longer be used to calculate annual leave entitlement.

Are Public and Bank Holidays Part of Annual Leave Entitlement?

It depends on what’s set out in an individual’s contract. Paid public and bank holidays can count towards an employee’s annual leave entitlement, but this is at the employer’s discretion.

Some employees are given public and bank holidays in addition to their 28 days paid annual leave allowance. Where an employee is required to work on a public or bank holiday, they may be given an enhanced pay rate or time off in lieu as a way of compensation. However, this is not an automatic entitlement and is again down to the employer’s discretion.

An Employee Leaves Without Taking Their Holiday Allowance – What Happens?

People job-hop all the time and others leave a company part-way through the year. They probably haven’t used up all their annual leave entitlement, so what do you do?

All employers have a duty to pay an employee for any holiday they’re legally entitled to but haven’t taken. This is known as pay in lieu of holiday. So, if someone has two days of unused annual leave when they exit a business, they must receive two days’ worth of pay.

This formula can be used to work out how much paid annual leave a departing employee is entitled to:

(A x B) – C = Holiday Pay Owed

Here:

• A is annual leave entitlement for a full year, in days
• B is the proportion of the year that’s been worked at the time of exit
• C is the number of days’ annual leave that’s already been taken.

Say an employee leaves a company whose holiday year runs from January to December on March 31 and has worked a regular 9am-5pm, five-day week. They receive the statutory 28 days annual leave allowance per year and have taken five days’ holiday by the time their notice period ends.

Therefore, B would be 3/12, or 25% to represent a quarter of the year that has passed.

This would be calculated as:

(28 x 0.25) – 5 = 2 days’ paid holiday owed to the employee

It’s important to note that an employment contract may also entitle an employer to demand that a departing employee takes any unused holiday during their notice period. Also, where an employee has taken more than their annual leave entitlement for the leave year to date, they may be required to pay back their employer for paid holidays taken but not yet earned.

Do You Need Help Calculating Annual Leave Entitlement For Your Employees?

Managing annual leave entitlement can be complicated and takes time. Staffology’s cloud payroll software calculates holiday and pay for you, enabling your business to remain compliant with employment law. Get in touch today.

Duane Jackson, November 30th, 2023

---

---