With so many
different types of employment contracts now being negotiated it is no wonder
some businesses struggle when working out sick pay and holiday entitlement. It is widely reported that part time working has
significantly increased since the recession. There has also been an increase in ‘zero hours’ contracts. This means that a worker is ‘available’ to work on an as and
when needed basis and could work anything from no hours to full time hours for
their employer. These contracts are
specifically attractive in the hospitality and retail industries.
In general, for straight forward
part time working, entitlements are relatively easy to calculate; e.g. if
someone works the same 3 days per week, every week, with the same number of
hours per day, the calculation for pro rata’d entitlement is a straight 3/5ths
of the full time equivalent.
However, a typical question I’m
often asked is “what happens with Bank Holidays?” Following the example above,
they would be entitled to 3/5ths of the bank holiday entitlement (usually 8
days per annum). Your employee will need
to book these days in the normal way, ensuring they have sufficient holiday to
cover the bank holidays they would normally work, any remaining entitlement can
be used at any other time.
The above calculations apply to
Company Sick Pay too. For example, if
your contract states 4 weeks full pay, your employee’s ‘week’ will be 3 days
each week. However, if your contract
states 20 days Company Sick Pay, you will need to pro rata this for part time
employees; i.e. 3/5ths of 20 (12 days).
The more complex calculation of
holiday/company sick pay occurs when staff work ‘flexible’ hours each week, or
are employed on a ‘zero hours’ contract. In these situations you need to
calculate entitlement on an hourly basis. However, you must remember that holiday
entitlement must be paid at the time your employee takes their holiday leave;
it cannot be included in their weekly or monthly salary.
So, for example; you have an
employee who works 20 hours per week on a ‘flexible’ basis; i.e. the actual
hours/days your employee works may differ from week to week. Assuming the full time equivalent holiday
entitlement is 28 days (5.6 weeks per annum) inclusive of bank holidays, the
calculation you need to use is:
5.6 weeks divided by 46.4 (the
actual number of working weeks per year) = 12.07%
12.07/100 x 20 hours = 2.42 hours (145.26 minutes holiday for each period of 20 hours worked)
12.07/100 x 20 hours = 2.42 hours (145.26 minutes holiday for each period of 20 hours worked)
If you need to break this down
further, such as working out how much holiday entitlement is earned per hour
worked because they are on a ‘zero hours’ contract, divide 145.26 minutes by
20, (which is 7.26 minutes holiday pay per hour worked).
The other question I frequently
get asked is, “what happens when someone leaves their employment?” If your employee has taken, and has been paid
for holiday before it has been accrued, you can claw this back from their final
salary payment. If you owe your employee
accrued holiday entitlement, you can either pay this in their final salary
payment or, if they need to work a month’s notice, stipulate that their
outstanding leave is taken during their notice period (you do need to give 2
weeks’ notice that you intend managing outstanding leave in this way).
With the complexities of applying
pro rata Holiday and Company Sick Pay entitlement, it is worth ensuring you
have a policy outlining how you intend managing these areas, refer to
entitlements in their contract of employment, and communicate this policy to
your staff so they are fully aware.
Should you require any help on
managing holiday or sick pay entitlements, please do not hesitate to contact us.
Sarah Daniels
HR Consultant
