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How to calculate holiday allowance for your small business

Understanding how to calculate holiday allowance can be a confusing process. There are a host of different factors at play, and sometimes making the calculation doesn’t feel straightforward. In this article, we’re going to show you how to calculate holiday allowance for your team – both for full-time and part-time workers.

All UK employees are entitled to 5.6 weeks’ statutory minimum paid holiday per year – this is a right protected by UK law. This entitlement is the same whether your employees are agency workers, working irregular hours or on a zero-hours contract.

However, the way in which that holiday allowance is calculated (and how many days of leave that comes to) will differ depending on the employee and their working arrangement.

Sounds complicated? Let’s break it down into simpler terms.

How to calculate holiday allowance for your team

We said all UK employees are entitled to 5.6 weeks of holiday a year. But what constitutes ‘a week’ will differ depending on each employee’s status (whether they’re part-time or full-time employees) and on the number of days worked.

If your team works a 5-day week, the calculation looks like this:

5-day week = 5

Annual holiday entitlement = 5.6

5 x 5.6 = 28 days

So if your team works 5-day weeks, they are entitled to a minimum of 28 days’ paid annual leave every year – because that is the equivalent of 5.6 weeks of holiday. You could give them more if you wanted to, but you can’t give them less.

You can use a time off management system like CharlieHR to do these calculations for each of your team members.

But what if you have an employee working part-time, not on a 5-day working week?

How to calculate holiday allowance for part-time employees

Now, part-time staff are still entitled to 5.6 weeks of annual leave – but as their weeks are shorter than the 5-day working week, their annual holiday entitlement will be lower as well.

Let’s say one of your team members only works two days per week. In that case, the calculation looks like this:

2-day week = 2

Annual holiday entitlement = 5.6

2 x 5.6 = 11.2

In the case of a part-time employee working 2 days per week, their annual holiday entitlement would be 11.2 days a year.

Employing somebody part-time? Use our quick and easy holiday calculator to find out how much holiday they are entitled to.

Or, if you use software like CharlieHR, the system will automatically pro rata holiday allowance based on your employees’ part-time working patterns.

Screenshot of CharlieHR's part-time holiday calculator
CharlieHR pro-rates holiday allowance based on your employee's working patters

If you’d like to take our time off system for a spin, you can start a 14-day free trial.

Are Bank Holidays included in the statutory holiday entitlement?

It’s important to remember that you can count UK public holidays as part of your team’s statutory holiday entitlement. You don’t have to, but you can if you wish.

This means that if your team’s statutory holiday allowance is 28 days per year, Bank Holidays (usually 8 days per year) can be part of that entitlement.

In this example, you’d offer 20 days of holiday + 8 Bank Holidays.

Remember that this is the minimum entitlement allowed by the law — you can offer more than this. And we usually recommend companies to offer more, given today’s the competitive hiring market.

If you use software like CharlieHR, your annual leave calendar will automatically take public holidays into account. You can decide to include public holidays in your team’s allowance or exclude them — the system will automatically adjust your team members’ allowance to reflect this.

Video of how to include or exclude public holidays in your allowance with CharlieHR
CharlieHR adds public holidays to your annual leave calendar

Statutory leave cap

Statutory paid leave is capped at 28 days per year. You may choose as an employer to give your team more paid holiday than this, but this is your choice.

How to work out pro rata holiday entitlement for new starters

What do you do if someone joins your team halfway through the year?

In this case, you need to prorate your employee’s holiday allowance to take into account when they joined your company.

In simple terms, that means if someone joined your company 50% through the year, they are entitled to 50% of statutory holiday allowance.

Use our handy holiday calculator to make sure you get this calculation right.

Or, even better, automate your time off process with HR software like CharlieHR.

Charlie handles all the holiday allowance calculations for you. Simply set a yearly holiday allowance for your team, input their start date, and the system will prorate their entitlements for the rest of the year.

Screenshot of Charlie's time off allowance dashboard
CharlieHR pro-rates annual leave allowance based on new hires' start dates

Find out more about Charlie’s time off feature.

How to calculate holiday entitlement for leavers

Every time one of your team members leaves the company, you have to calculate their remaining holiday entitlement. It is important to get this right because failing to give them the remaining holiday they’re entitled to may result in legal action against your company.

You can use this formula to calculate leavers’ holiday entitlement:

Full annual holiday entitlement (in days) x months worked ÷ 12

For example, if you offer 28 days of holiday leave per year, and your team member is leaving on July 1st, it will be:

28 x 6 (months worked) ÷ 12 = 14 days of allowance remaining

N.B.: Remember that from this resulting number, you’ll need to deduce the number of holiday days they’ve already taken in your holiday year!

With annual leave management software like CharlieHR, you can save yourself the hassle of doing these calculations manually. Simply input your team member’s leaving date, and the system will prorate their remaining leave automatically.

Video of how to use CharlieHR to calculate holiday allowance for leavers
CharlieHR calculates remaining holiday allowance for leavers

How do you calculate holiday pay?

In the UK, employees are entitled to a week’s pay for every week of annual leave that they take. Their actual holiday pay will depend on factors like whether they work full or part time, and the amount of holiday they’ve already taken (more information on the gov.uk site).

A simple way to calculate your team members’ holiday pay is by using our Holiday Pay Calculator.

How to manage carry-over annual leave

According to UK employment law, team members are allowed to carry a maximum of eight days of annual leave entitlement over into a new year – but only if this has been agreed with their employer in their employment contract.

In other words, you are free to set your own holiday rollover policy, which will state whether you allow your team to carry over holiday allowance from one year to the next, and how much.

If you’re using an HRMS platform like CharlieHR, all you need to do is to set the number of days (if any) you allow your team to carry over, and the platform will automatically roll that time to the new year for all team members.

Screenshot of how to calculate carry over holiday in Charlie
CharlieHR automatically carries over your chosen time off to the next holiday year

Check out our blog for more information about time off tracking

We also offer a 14-day free trial, if you’d like to have a look around our time off management features – which includes managing employee absences of all types.  

Start a free trial of CharlieHR by clicking here

And perhaps you'd like to have a look at our guide to understand what is annual leave.