How are holiday allocations calculated?

SMB has a highly flexible and sophisticated allocation calculation structure that, once defined, can automatically calculate the holiday allocation for an employee regardless of start date, leaving date, changes in working hours or length of service.

The allocation itself is driven by three core components:

  • The base Full Time Allocation: This is set directly on the employee and reflects the amount of holiday an employee would receive in a given year if they were full time and worked the entire year.
  • The working hour pattern. The “Holiday Percentage” on the working hour pattern specifies the amount of the Full Time allocation the employee should receive while working to this pattern.
  • The employee’s Start Date and, if applicable, Leaving Date: If the employee joins or leaves partway through a holiday year, the system will pro-rata the allocation accordingly.

As an example, let’s assume that your holiday allocation for a full time employee is 28 days a year inclusive of any bank holiday and assume the employee is working to a full time pattern with 100% holiday percentage.

In this instance, the employee is working the full year, so the allocation is not pro-rated. Their working hour pattern percentage is 100%, so that is not pro-rated, so the employee would receive the full 28 days allocation.

Now, in a second scenario, let’s assume the employee joins half-way through the holiday year. In this instance, they are working 50% of the year, so the allocation is pro-rated by 50% to give them a final allocation of 14 days.

As a third scenario, let’s have the same employee joining halfway through the year, but only working a three day week (their working hour percentage is set to 60%). In this instance, the employee would only receive 50% of the year’s allocation (as they are only working half of the year) and that allocation is pro-rated to a three day week (60%), so this employee would receive 60% of 14 days = 8.5 days in total. 

If an employee changes their working pattern partway through the year, the system will calculate their allocation for each working period; the time they were working to a specific pattern. To illustrate:

Employee A has worked the full year, and worked full time for the first six months, then went to a three day week. The system will automatically calculate their allocation like this:

For the first six months, they were working to a 100% pattern, so receive 100% of half of the year’s allocation: 14 days in total

For the second six months, they were working to a 60% pattern, so receive 60% of half of the year’s allocation (14 days): 8.5 days in total

Giving them a total allocation for the year of 22.5 days.

Managing Bank Holidays

The last piece of the calculation is how bank holidays are treated. For full time employees working the full year, this won’t have any effect but for part time employees or employees leaving or joining during a holiday year, this can dramatically change the amount of “bookable” holiday allocation they have, depending on whether bank holidays are pro-rated or not.

To illustrate, let’s assume that the base allocation is 25 days plus 8 bank holidays and that our employee is joining the business on July 1st, halfway through the year.

If bank holidays are pro-rated, then the system will first work out their total allocation by counting the total number of bank holidays in the year and adding that to the base allocation (25 + 8 bank holidays) = 33 days total. This total is then pro-rated, leaving the employee with 16.5 days total allocation. Then, any bank holidays that fall during the employee’s working time are removed (3 bank holidays in the second half of the year), leaving the employee with a final allocation of 16.5 days total,  3 days deducted for bank holidays, 13.5 days of bookable holiday remaining.

If bank holidays are not pro-rated, then the calculation is slightly different. The system will first pro-rate the base allocation, then add the number of bank holidays that fall during the employee’s working time and deduct those. So in this case, the employee would receive 12.5 days pro-rated allocation plus the three bank holidays, leaving them with a total allocation of 15.5 days, 3 days deducted for bank holidays, 12.5 days of bookable holidays remaining.

Whether you should pro-rata bank holidays or not comes down to the wording in your own employment agreements. If your organisation offers statutory 28 days inclusive of bank holidays then you should always pro-rata, to ensure you are providing the correct base allocation for employees. If your allocation is more generous, then your own agreements will define whether the employee receives a total allocation inclusive of bank holidays or a base amount plus the bank holidays that fall during their working time.

While it can seem daunting to setup, the flexibility and automated approach of calculating holidays this way means that employees need only be setup once. Any change to their working time or their employment will automatically be reflected in their allocation without any need for adjustment.

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