Within the workplace, there are many HR responsibilities that employers need to stay on top of.
One of these responsibilities includes accounting holiday accrual for your employees. Calculating this can be complicated, so you’ll need to stay organised and follow the rules carefully.
In this guide, we’ll explain what holiday accrual is, how to work it out, and the rules involved with annual leave accrual.
What is Holiday Accrual?
In a business, most employees have an entitlement of 28 days paid holiday each year.
However, some employers choose to use a holiday accrual system instead. This way, holiday pay entitlement starts to build up from the moment an employee starts work.
As they continue their employment, they will accrue a proportion of their annual entitlement on monthly basis.
For example, after 6 months of working, an employee would have accrued ½ of their annual entitlement.
What is Holiday Pay Accrual?
This is when an employee has holiday leave left over at the end of the year.
This can differ in every business, so it’s important you know when calculating your employees leave entitlement. There are several ways in which you can calculate holiday pay accrual. You can base it on:
- The number of days or hours worked per week.
- The average number of hours worked over a period of time.
- Regular shift patterns for an employee.
When should it be made?
Employee benefits are expected to be settled wholly within twelve months of the end of the reporting period.
This requires your business to allow employees to carry over 1.6 weeks leave. Anything after this is up to the employers discretion.
How to Work Out Holiday Accrual
To work out how much holiday an employee accrues each month, you just need to use a simple sum:
- Calculate how many days an employee has worked (including bank holidays).
- Divide the number by 12.
For example, if an employee worked for 28 days a month, divide this by 12 and your answer will be 2.33.
The answer represents the leave they are entitled to per month.
To work out the holiday accrual per week, multiply the number of days an employee works a week by 5.6.
You can also use a holiday accrual calculator to see how many days an employee is entitled to.
How much holiday have I accrued?
How holiday accrual works is up to you. Remember, holiday pay accrual is not an employee’s right, and you can legally force them to take all their leave entitlement.
However, if an employee has leftover leave at the end of the year, then an accrual may take place . As an employer, you may allow your staff to roll the holiday over into the next year.
Has COVID-19 Affected Holiday Accrual?
If an employee cannot take leave because of the impacts of COVID-19, they may be able to carry untaken leave into the next two years.
Amends were made to the Working Time Regulations 1998 was introduced for employees who couldn’t take their holidays because of coronavirus, because it wasn’t ‘reasonably practicable’.
This meant they could carry up to four weeks of unused leave into the next two annual leave years.
Reasonably practicable is a legal requirement for employers. It means what you are doing is reasonably able to do to ensure the health and safety of employees.
It covers several circumstances such as:
- A business received significant demand due to COVID-19.
- A business’ workforce was disrupted due to COVID-19.
- An employee’s health was affected and they required time off.
- If the remaining workforce could cover production if an employee went on leave.
- If an employee had leftover leave days at the end of the year and could use them at a later date.
With these circumstances in mind, you should still encourage employees to take their paid holiday.
Employees should aim to take holidays at the earliest reasonable opportunity.
Get advice on holiday accrual with BrightHR
To ensure your holiday accrual system stays up-to-date and organised, you should continually review it annually.
As holiday accrual is not an employee’s right, you can ensure they take their leave entitlement before the year is up. If its untaken, impacts like COVID-19 may affect unused leave and could affect your business’ performance.
BrightHR can alleviate any stress you may have about holiday accrual and help you to prepare for any unexpected obstacles.
If you need any help to create a holiday accrual system, don’t hesitate to get in touch with one of our experts.
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