Our colleagues at Personnel Solutions shared some interesting information with us regarding Calculating Holiday Pay:

For many years Employers have been calculating holiday pay on the basis of 12.07% of an Employee’s total earnings. The Supreme Court put a stop to this in 2018 (Harper Trust v Brazel) and required Employers to base annual holiday pay on an average week’s pay multiplied by 5.6 weeks per annum.

The Government has now reversed that decision. Councils can now revert back to the 12.07% method. For example, if someone earns £30,000 per annum, their holiday pay would be £3621 (£30,000 x 0.1207).

This may benefit Councils who employ staff on variable hours. The Council will be able to calculate their holiday pay entitlement based on 12.07% of what the Employee earns for the pay period.

Rolled Up Holiday Pay

This is another reversal by the Government of a Court decision. Prior to 2009 Councils could add a 12.07% onto a worker’s hourly rate of pay, to provide them with their holiday pay entitlement. This was an alternative to paying the worker holiday pay when they took annual leave.

For example, if a Clerk on NJC scale point 23 earns £16.67 per hour and works 20 hours per week, their total pay for that week would be £333.40. Their Holiday Pay entitlement would be 12.07% of that - £40.24. This would then be split over the 20 hours worked to add £2.01 to the hourly rate of pay. The Employee would receive £16.67 + £2.01 = £18.68 per hour, £373.64 per week.

The 2009 decision of the Courts to stop this method of payment has now been revoked, and Councils can resume the practice in April 2024. This may be popular with Clerks and other Employees whose hours are variable, and do not necessarily want to book a specific period of paid holiday. The Council’s pay roll would simply need to calculate 12.07% of the total pay and add it to the hourly rate of pay.

All overtime must be authorised.

You can find more information regarding holiday pay on HMRC’s website here.

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