Understanding how holiday pay is calculated is crucial for workers and employers alike, particularly in the screen sector where employment arrangements can vary widely.
Holiday pay means that when a worker takes time off work, they are still financially supported, but the calculation can often feel complicated. This guide explains the key methods and recent changes in holiday pay rules. By the end of this article, you’ll have a clear understanding of how holiday pay is calculated. Should you need further clarification, feel free to drop a comment below. A reminder that nothing on this platform is legal advice but we’re here to point you in the right direction if needed.
Holiday pay is the compensation workers receive while taking their annual leave in the UK. Workers have the right to be paid the same amount during non-working holidays as they would earn in a regular working week. This right applies to most types of workers, including full-time, part-time, zero-hours contract, and agency workers, regardless of what their contract might state.
In the screen sector, where short-term contracts, freelance work, and irregular hours are common, understanding who receives holiday pay, and how holiday pay is calculated is especially important. Workers in this industry may find their holiday pay is based on variable hours or shift patterns, making it essential to calculate weekly pay accurately.
Most regular hour and fixed pay workers have a legal right to a minimum of 5.6 weeks paid annual leave, which is the equivalent of 28 days per year for a full-time (five days a week) worker. Some workers negotiate additional contractual holiday leave in addition to the statutory minimum. Although the regulations assume that eight days per year relate to public holidays, there is no rule to say that those eight days must be taken on public holidays.
Some rules only apply to the statutory twenty days holiday, and not the eight days holiday. It may be necessary to calculate holidays on a pro rata basis for part years of employment. Fractions of days are allowed, and there is no default rounding up of entitlement. A worker has no automatic right to take holiday leave until it accrues at the start of each month during their first year. For subsequent years, their entitlement accrues at the start of the year (but could be subject to a contractual holiday approval process).
Since 1 April 2024, some workers (irregular hours workers and part-year workers) are not entitled to 5.6 weeks paid annual leave. Instead, they accrue statutory holidays at the rate of 12.07% of hours worked (plus an equivalent entitlement for holiday accrued during sick leave or family-related statutory leave). The holiday pay can be paid at the same time as the relevant salary, or when they take their annual leave.
Either way, the statutory entitlement of holiday pay ensures workers can take time off without financial worry. However, those genuinely self-employed or running their own business are not eligible for statutory paid holidays. Instead, they can charge an hourly or daily rate that takes account of their own arrangements for time off.
| Working Pattern | How to Calculate Weekly Pay | Example |
|---|---|---|
| Regular hours and fixed weekly pay (full- or part- time) | Use the worker’s standard weekly pay. | A full-time worker earns £500 per week working 40 hours. Their holiday pay is £500 per week of leave taken. |
| Pay the first 4 weeks at the ‘normal’ rate of pay (including regular overtime and commissions). Pay the remaining 1.6 weeks at the ‘basic’ rate. | A full-time worker with £500 base pay and £50 overtime earns £550 for 4 weeks’ leave, then £500 for 1.6 weeks | |
| Shift workers with regular hours | Calculate the average weekly hours worked over the last 52 weeks and multiply by the average hourly rate. | A shift worker works 35 hours one week and 45 hours the next, averaging 40 hours at £20/hour = £800 per week of holiday pay. |
| Irregular hours or part-year workers | Take the worker’s average pay over the last 52 weeks (counting only weeks they were paid). | A zero-hours worker earning £200 one week, £300 another and nothing in others averages £250 = £250 holiday pay per week. |
| Pay all holiday at the ‘normal’ rate of pay, including commission, regular overtime, and service-based payments. | A casual worker averaging £300/week including £50 commission earns £300 for each week of holiday. | |
| Workers paid monthly | 1. Divide monthly pay by hours worked to calculate the average hourly rate. 2. Multiply by weekly hours worked | A monthly worker earns £2,000, working 160 hours. £2,000 ÷ 160 = £12.50/hour. If they work 40 hours/week: a week’s holiday pay will be 40 x £12.50 = £500. |
‘Normal’ Rate of Pay: Includes commission, regular overtime, and pay linked to service or qualifications (but excludes bonuses).
Example: ‘Normal’ Rate of Pay: Includes commission, regular overtime, and pay linked to service or qualifications (but excludes bonuses).
‘Basic’ Rate of Pay: Regular base pay without additional enhancements.
Example: A worker earning £400 base pay gets £400 for holiday if paid at the basic rate
Rolled-up Holiday Pay: Holiday pay might be expressed as being included in the hourly rate for irregular-hours or part-year workers (if allowed), but the split should be clearly set out.
Example: A worker paid £20/hour (inclusive of holiday pay) is effectively paid £17.85 + £2.15 holiday pay. The split should be clear on all records and payslips.
Example: A worker paid £12/hour (inclusive of holiday pay) is effectively paid £10.71 + £1.29 holiday pay. The hourly rate is under the national minimum wage for those aged 21 and over.
The screen sector faces unique challenges when it comes to calculating holiday pay, largely due to the prevalence of irregular working patterns, short-term contracts, and freelance arrangements. Below are some common pitfalls that those with responsibility for holiday pay calculation should watch out for:
In the screen sector, workers could be misclassified as self-employed or contractors when they should be treated as employees or workers. This distinction is critical because only employees and workers are entitled to holiday pay. Misclassification can lead to non- payment of holiday entitlements and potential legal disputes.
Example: A freelance camera operator hired on a project-by-project basis might be incorrectly classified as self-employed, denying them holiday pay rights. If their contract or working relationship indicates control and integration into the production company, they could qualify as a worker entitled to paid leave.
The screen sector relies heavily on workers with irregular hours or varying pay rates. A common mistake is failing to calculate their holiday pay based on their average weekly pay over the previous 52 paid weeks, as required by law.
Example: A production assistant working fluctuating hours each week may have their holiday pay miscalculated if the employer only uses recent weeks or excludes periods where no pay was re
Holiday pay must reflect the worker’s normal pay, including regular overtime, commission, or additional payments like location allowances or skill premiums. Employers often exclude these from calculations, resulting in underpayment.
Example: A sound engineer who regularly works overtime during shoots must have this overtime included in their holiday pay calculations. Excluding it would result in a lower-than-legal holiday pay rate.
Rolled-up holiday pay (where holiday pay is included in the hourly rate) is generally not permitted for workers with regular hours in the UK. However, it can still be used for irregular-hours workers in some cases. Misusing this method or failing to distinguish between eligible and ineligible workers can cause compliance issues.
Example: A production company paying rolled-up holiday pay to a full-time editor with fixed hours is in breach of regulations. This approach is only appropriate for irregular-hours workers under specific conditions.
Legislation around holiday pay has evolved, including a recent law allowing some employers to calculate holiday pay based on a fixed percentage of salary. Using outdated methods or advice can lead to errors.
Example: A payroll team using pre-2024 calculation methods might incorrectly calculate leave for a part-year worker, leading to either overpayment or underpayment.
Screen sector employers frequently hire workers on short-term contracts, which can complicate holiday pay calculations. Employers may fail to account for accrued holiday pay when the contract ends, risking legal action.
Example: A costume designer contracted for a six-week shoot may not receive proper holiday pay for the days accrued during their employment. This oversight violates their statutory rights.
Provide Training: support everyone with responsibility for payroll on sector-specific nuances and legal obligations.
By addressing these common pitfalls, screen sector employers can avoid costly disputes and ensure workers receive the holiday pay they are entitled.