I have been informed that holidays are calculated using the 5.6 weeks (28 days). I have also been informed that we can longer use the 12.07% accrual method for calculating holidays. How then do we accrue holidays upon termination? What is half-day rounding?

Answered by Sheila Scott

Thank you for your question. I spoke to our Employment law firm, Napthens  as this is a complicated area and this was their response;

Calculating annual leave upon termination

In the first instance, review the employee’s contract to check whether there is a contractually agreed method in which accrued leave is to be calculated upon termination. If the contract is silent on this topic then you can use the recommended formula (A x B) – C

Where:

•  A is the period of statutory leave to which the worker would have been entitled to the whole of the leave year in which employment ends.
• B is the proportion of the worker’s leave year which expired before the termination date, expressed as a fraction.
• C is the period of leave taken by the worker between the start of the leave year and the termination date.

By way of a working example:

A worker’s leave year runs from 1 January to 31 December. He leaves employment on 15 August (227 calendar days into the year) having taken 11 days’ holiday during the leave year. As the worker was on a full-time contract for 5 days’ work a week, this amounts to 2.2 weeks (2 weeks and 1 day) of his 5.6-week entitlement. The calculation is as follows: (5.6 x 227/365) – 2.2 = 1.283

He is therefore entitled to 1.283 times a week’s pay

This same example could also be calculated based on days rather than weeks. The worker’s overall entitlement for a year expressed in days is 5 x 5.6 = 28. The amount of holiday he has left on termination is (28 x 227/365) − 11 = 6.41. Therefore, the worker is entitled to 6.41 days’ holiday pay.

Alternatively, you may wish to use the Government holiday entitlement calculator- https://www.gov.uk/calculate-your-holiday-entitlement

Half-day rounding

Accrued entitlement for leave purposes is rounded to the nearest half-day. This means:

• If an employee has accrued less than half a day of the holiday, you must round this up to half a day e.g. 11.32 days accrued the half-day round-up would be 11.5 days.
• If the employee has accrued more than half a day but less than a full days leave, you must round this up to a full day e.g. 11.56 days leave accrued will be rounded up to 12 days annual leave.

I hope this helps.