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Correctly calculating holiday entitlement for practice staff

9 June 2023

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HR expert Liz Willett guides practices through some of the complicated issues when working out how and when your staff should take holiday

Calculating what leave your staff are due, what they can accrue and what they can carry over can become a baffling task.

Here’s a summary of common queries experienced by practices, solutions for resolving particular issues and some essential housekeeping rules to keep holiday management running smoothly, your employees suitably rested, and correctly paid.

Why is keeping records of time worked by employees important?

You should be keeping records of the hours that your employees work and reviewing them regularly to ensure they are taking appropriate breaks, annual leave and you are paying them correctly.  The issue of recording hours becomes even more important if you are paying staff at or near the national minimum wage as additional hours worked that are not paid could leave you in breach of National Minimum Wage laws and at risk of being fined and owing back pay.

Should holiday pay include overtime?

Yes. Overtime does not need to be contractual in order to be included in the calculation of holiday pay.  Neither does it need to be regular. This means that if you offer or require your staff to work overtime, these payments should be included in how you work out holiday payments.  It is advised that you take an average of the last 12 weeks worked (excluding periods of no work/pay) to establish the overtime to be used in the annual leave calculation.

For example, an employee works 20 hours per week under contract at £10 per hour but has undertaken 30 hours of overtime (also paid at £10 an hour) over the past 12 weeks.  She then wishes to take a week of holiday, so her pay for that week of holiday should take into account the overtime.  We would advise calculating her additional pay as this: (30/12) x 10. So, in this case, the employee would be entitled to an additional £25 in her week’s pay.  If overtime is paid at an enhanced rate, this enhanced rate should be applied. 

How do I calculate holiday pay when working overtime for another service linked to our practice?

We advise practices that provide staff for other associated employers (like PCNs, Vaccination Hubs or Extended Access) that holiday pay be incorporated into the contractual agreements between the relevant PCN/Vaccination Hub/Extended Access members and the practice.

Work undertaken on this basis should be included in holiday pay calculations at practice level. This will require some planning and careful consideration and may not be welcome news. However, our current advice is, wherever you can, offer overtime on a time off in lieu (TOIL) basis if you do not wish to make the calculations for overtime.  We haven’t encountered any challenges to this advice so far although we recognise it’s a hot topic at the moment.

Can I allow carry over of statutory annual leave?

 Usually, employees aren’t permitted to carry over the statutory element of annual leave unless they have been off on maternity/adoption/parental leave or long-term sick.  The statutory element of annual leave is 28 days, including eight bank holidays (pro rata).  However, during Covid in 2020, the working time regulations in relation to annual leave were suspended and people were permitted to carry over leave accrued into 2021 and 2022. This needed to have been taken by the end of 2022.  A reminder that statutory leave must be allowed to be taken as holiday and may not be paid in lieu, unless the employee terminates their employment.

What about carry over of non-statutory annual leave?

Some employers allow for the carry over of annual leave days that are over and above the statutory minimum, into the next year.  Under your contract or policy you may have a set time before which they are required to take this leave, otherwise it will be lost. This is called a ‘use it or lose it’ clause/policy. If you don’t have this in place, or you have agreed a longer period of time for the carry over, you are required to ensure that an employee can take this leave, or compensate them accordingly.  This may mean you offer to buy back annual leave.  In all cases, it is essential that you make sure staff do take their statutory minimum annual leave.

What if we are getting close to the end of the leave year and an employee hasn’t taken enough leave? 

If employees haven’t taken their statutory minimum leave, you must arrange for them to do so.  This may mean enforcing it if there is no obvious good reason they haven’t been able to take it. This is not ideal but time off is important for employee wellbeing and your organisation has statutory responsibilities to meet. Usually, you should give twice the amount of notice as the period of leave you propose them to take (so two weeks’ notice for one week of leave). However, if this means the individual is unable to take the leave in that time, shorter notice may be acceptable.

For example, a practice manager entitled to six weeks’ leave plus bank holidays in a single leave year has taken two weeks and bank holidays in 10 months of the leave year. This means his employer must ensure he takes at least two weeks of leave within the next two months.  A discussion will then need to take place about whether he can carry over the other two weeks contractual leave or be compensated for it, or whether there is a ‘lose it or use it’ policy. 

Be aware that if an employee has previously booked leave they then had to cancel for operational reasons i.e. to allow services to run, or have been unable to book leave for some other good reason, a ‘use it or lose it’ policy may be viewed as unfair. In these circumstances, we recommend coming to an agreement with the individual rather than dogmatically enforcing the rule.

An employee who has been away for a period of time, either through long-term illness or on parental leave may not have been able to take their statutory leave. In this case, their leave may be carried over but should be taken within the following leave year. 

Aim to monitor leave on a quarterly basis, so you can see that staff are getting a break and to avoid problems caused by a rush to squeeze leave in by the end of the leave year. 

How do I manage the workaholics?

You may have some workaholics in the team who just can’t or wont switch off.  Employees must have 28 days a year (pro rata) rest.  This means not working or being interrupted.  If you have staff members who find it difficult to take a break, you can consider suspending their email and work accounts for the period of their leave and instructing other staff not to contact them.  An employer has a responsibility to ensure that employees take their statutory rest breaks and that they are not interrupted.

How do I work out entitlement for part-time workers when it comes to bank holidays?

Part-time workers who do not work on days that bank holidays fall are still entitled to a pro-rata bank holiday entitlement.  This should be added to their ordinary leave.  Part-time workers who work on days that often fall on a bank holiday may feel disadvantaged because they are often required to book leave to ensure they are paid in full for bank holidays where they cannot work. 

Some employers allow them to work TOIL or take bank holidays as unpaid leave instead. This means that worker can book leave when they actually want it rather than to coincide with bank holidays, which may not be their preference. This is a perfectly legal solution, if this issue poses a problem for your organisation.

Liz Willett Chartered MCIPD is Head of Business Partnership at  Kraft HR Consulting Ltd, which works closely with practices, federations and PCNs in the Midlands and further afield