Do You Know How to Calculate Annual Leave?
A common complaint among managers and business owners is that they spend too much time administering and managing annual leave. It can be a complicated task to work out exactly how much time off each employee is entitled to, particularly for new starters.
The complexity of the task is added to by the fact that it changes depending on various factors. The first factor to consider is location. Around the world, employees are legally entitled to different amounts of paid holiday (the USA stands alone among developed countries in having no legal entitlement to leave). Each country has different rules on whether this includes public holidays. Secondly, many companies offer additional days of paid holiday with an increased length of service, to encourage staff loyalty. This can mean that even two employees in the same role at the same site may have different entitlements.
To complicate things further, part-time employees need to have their allowance worked out pro rata. For example, in the UK, the legal entitlement is 5.6 weeks paid leave each year. This is usually referred to as 28 days since that is the figure for an employee working a five-day week. For part-timers, the number will be less.
Another rule that changes depending on location is whether public holidays are in addition to the legal allowance, or can be included within it (as in the UK). For workplaces that close on public holidays, this might make little difference, but for the many retail, catering, and other businesses that do not, managers need to factor this in.
Even once you’ve got your head around the calculations, new starters complicate things again. The entitlement is usually stated as a per-year number of days, and each company might use a different year. Many use the calendar year, calculating leave entitlement from January 1st to December 31st, but you might also use the company’s accounting year-end, or the anniversary of when the company started trading.
Whenever your year-end falls though, it is unlikely that new employees will all start then, meaning that one of your tasks for each new employee is to work out how much holiday they are entitled to in their first year.
Let’s look at an example of a new employee of a British firm, starting three months into the holiday year.
As we mentioned above, the holiday entitlement for a full-time worker in the UK is 28 days, which can include the UK’s 8 national public holidays. With nine months of the year remaining the new employee’s entitlement will be three-quarters of the total:
28 x 0.75 = 21 days (including any public holidays)
If your staff does not work on bank holidays you will need to factor this in.
If the employee only works 2 days a week, the calculation is a little more complex. The entitlement is worked out as 5.6 working weeks a year. The same calculation as above must also be done to work out the remaining leave in the first year:
5.6 x 2 = 11.2 days
11.2 x 0.75 = 8.4 days
As the example shows, these calculations can be complicated and time-consuming. There are tools to help you out, however. At LeaveWizard we feel that good leave management software should take the stress out of holidays. That’s why our easy-to-use online app seamlessly calculates employees’ leave entitlement, including factors such as location, part-time hours, and when the year a new employee started.
With LeaveWizard, your staff will also receive email updates on their remaining entitlement. This makes sure that all of your staff get the correct amount of paid holiday, without creating extra paperwork for you. Why not take our online product tour and see for yourself how we can take the stress out of managing annual leave for your business?