How to calculate holiday entitlement if an employee reduces their working week.

Quality advice has helped HR:4UK thrive for 40 years now. Throughout our time, we’ve helped and advised you on a whole variety of HR issues, big and small.  Recently, we’ve received quite a few questions regarding the impact on holiday entitlement when an employee is required or requests to work less days each week.

Typical Question: When an employee requests to reduce the number of working days from 5 to 4, is their holiday entitlement affected?

We have spoken to one of our expert advisors, Nita Joshi, to see what she has to say.

The answer may seem simple: Surely, if an employee works one less day, then they should get less holiday, right?

Yes in some cases but not always and it is vital to get it right.  If an employee discovers that they aren’t being provided with the correct amount of holiday, it may be very costly to the business either financially via a claim through an employment tribunal where you could be expected to pay back any holiday pay due over the last 2 years or there may be potential ramifications relating to employee morale, retention and productivity.

Luckily, Nita has some excellent guidance and examples to help you be 100% compliant.

When is holiday entitlement affected?

The general rule is that if you calculate holiday payments in days, the entitlement is affected and will subsequently be reduced. However, if you calculate holiday entitlement in hours, the entitlement will only be affected if the number of working hours is reduced.

So, what does that look like in practice?

Examples

Eric, a project manager, works 40 hours per week over five days working a standard 8 hour day. His current holiday entitlement is 28 days in line with the statutory working time regulations. He’s requested a move to a four day week, working 10 hours per day.

In summary his days have reduced but his contracted hours per week have remained the same ie 40.

If you calculate his entitlement in days, his holiday entitlement becomes 22.5 days per year or 4 x 5.6 weeks rounded up.

However, if his entitlement is calculated in hours, as he still works 40 hours per week, this means his holiday entitlement will remain at 224 hours per year (5.6 weeks x 40 hours).

Let’s look at another example:

Hannah is an accountant. She currently works 37.5 hours per week over five days (7.5 hours per day) and her holiday entitlement is 28 days per year. She’s just requested to work a four day week, working 6 hours between 9am and 3pm (school hours) therefore working 24 hours a week.

Like Eric, if you calculate her entitlement in days, she works one day less each week, so her holiday entitlement reduces to 22.5 days per year (5.6 weeks x 4 rounded up).

However, if you calculate the entitlement in hours, as she has requested a reduction in hours, her annual entitlement will reduce from 210 (5.6 x 37.5) to 134.4 hours (5.6 weeks x 24 hours)

If Hannah had continued to work 7.5 hours a day, therefore 30 hours per week, her holiday entitlement in hours would be 168 hours (5.6 weeks x 30 hours).

If Hannah wanted in the future to reduce to a 3 day week working 6 hours a day ie 18 hours per week, her holiday entitlement in days would be 17 including bank holidays (3 x 5.6 weeks rounded up) or if you calculate holiday in hours, her new entitlement would 100.8 hours (18 x 5.6).

Working 2 days a week at 6 hours a day would be:

11.5 days (2 x 5.6) or 67.2 hours (12 x 5.6)

And working 1 day at 6 hours a day would be:

6 days (1 x 5.6) or 33.6 hours (6 x 5.6)

If your company offers more than the statutory entitlement of 28 days including bank holidays for someone that works 5 days, then you will need to calculate how many weeks they get.  For example if you offer 25 days holiday plus the 8 bank holidays, that’s 33 days which equates to 6.6 weeks (33 divided by 5 days)

If you offer 23 days plus the 8 bank holidays ie 31 days, that equates to 6.2 weeks (31 divided by 5 days).

How do I make sure I’m Compliant?

Here are some key things you can do to make sure you’re compliant:

• Double-check your employees’ contracts; you need to clearly understand if their holiday entitlement is calculated in days or hours and you can then ensure the effect on holiday entitlement is properly calculated and clearly communicated.
• Always round holiday up rather than down ie 11.2 days will become 11.5 or 12, not 11.
• Switch to a uniform option for all staff. One potential strategy is to change your holiday entitlement calculation to a uniform method. This will make it easier for you to adapt to any changes in working hours or days.

HR:4UK

In many situations, especially after the pandemic, flexible working has become the norm for UK businesses. It can offer a great way to boost employee well-being and morale as well as provide a better work/life balance and potentially even boost productivity!

However, if you are unsure about making this change and the possible knock-on effects, our expert team is ready to answer any questions you may have on this subject whether it is across the whole business or for individual employees.

If you’d like to discuss in more detail, please give us a call on 01455 444222 or email