New functionality to allow the calculation of Flexible workers’ holiday allowance and pay to be done over 52 weeks, in line with new legislation.
Release date: 12th March 2020
Reason for the Change
New Legislation will come into force on 6th April 2020 as part of the ‘Good Work Plan’ whereby holiday allowance and pay for Flexible employees must be calculated over a 52 week period.
For more information about the Good Work Plan, please see: https://www.gov.uk/government/publications/good-work-plan
All HR & Payroll users.
Update - 08/04/2020
On 24/03/2020, we removed the automation that switches the flexibel holiday calculation over to 52 weeks. Due to the guidance provided by HMRC in regard to the average pay for furloughed employees, we have now restored the automatic flagging of the 52 week calculation when portals are rolled forward to the new tax year. Any portals that have rolled forward, had their calculation updated on 6th April, in line with UK Legislation.
The change to legislation means that all flexible holiday calculations must be done using the 52 week average calculation from 6th April 2020 regardless of when the Holiday Year start date is. This means there are likely to be differences in employees’ holiday allowance and day rate if a customer’s holiday year start date is not April 2020.
At the bottom of this release note are details of how to configure a custom report, which can be run before and after the calculation change to help with understanding the impact of it.
To switch on the 52 week holiday calculation:
- Go to HR Module > Administration > Global Settings > Edit Default Holiday Settings > Holiday Calculations
- Select 52 Weeks against the Calculation of average number of days worked based on 52, 26 or 12 weeks? setting
Fig.1 - 52 week holiday calculation for flexible staff
Holiday Pay for Flexible Employees
The legislation states that the calculation for holiday should be done using an average of both hours and days worked per week over a period of 52 worked weeks.
The definition of worked, according to the Department for Business, Energy & Industrial Strategy (BEIS) is:
“A week in which the worker was paid any amount for work undertaken during that week.”
If an employee does not have 52 weeks’ service, then the calculation will use the total number of weeks worked.
If an employee has periods of absence where no hours were worked within the last 52 weeks, the calculation will look over the past 104 weeks in order to calculate the average hours and days. If there are still not 52 weeks worked, the calculation will use the total number of worked weeks available.
Flexible Employees – Calculating Holidays Allowed
Average Days per week
The calculation will look back over the last 52 weeks that the employee has worked to establish the total days worked within the period.
The calculation is as follows:
(total number of days worked in period) ÷ (number of weeks in period)
Calculation – Days Allowed
The Days Allowed shows the number of available holiday days an employee has in the current holiday year.
The Calculations are as follows:
- For employees whose employment started before the holiday year start date:
(average days per week)*(the number of weeks holiday allowed for employee)*(days difference between holiday year start date and holiday year end date ÷ days difference between holiday year start date and holiday year end date)
- For employees whose employment started after the holiday year start date:
(average days per week)*(the number of weeks holiday allowed for employee)*(days difference between employee start date and holiday year end ÷ days difference between holiday start date and holiday year end date)
Flexible Employees – Calculating Holiday Daily Rate
The calculation is as follows:
(holiday days taken in current period)*(average summary rate)*(hourly rate of pay)
To calculate the average summary rate:
((total pay over previous 52 weeks) ÷ (number of days worked over previous 52 weeks)) ÷ (hourly rate of pay)
Casual Holiday Pay
There are no changes to the way in which Fourth’s Casual Employee Holiday Calculation will work
More information about the Casual Holiday Scheme within HR & Payroll can be found here: WFM - Casual Holiday Scheme
Identifying Changes to Holidays
Due to the timing of the calculation changes, customers may want to understand the impact of the changes in terms of holidays allowed and daily rate.
The steps below show how to create a custom report which can be run before and after the setting has changed.
- Go to HR > Reports > Customised Reports > Create Template
- Add a Template Name
- Select Holiday Data from the Report Type drop-down
- Select Save to proceed
Fig.2 - Custom Report template
- Within the next page, select the required information by ticking the box(es) next to the field(s)
Fig.3 - Custom Report field selection
- Adding a number in the Sequence column will determine in which order the fields are returned in the report
- Adding the Condition “=” next to ‘Status’ will allow returning of information for current employees only – see Fig.4
- Once all fields are selected, Save and then select Run Report
- Type Current in the value against ‘Status’
Fig.4 – Returning information for current employees
- Select Run and the report will generate in Excel
Once the report is created in Customised Reports, it can be accessed again at any time.