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How to Calculate Annual Leave Entitlement

By In Blog, Payroll On July 23, 2019


Annual leave can be a tricky area for employers to navigate, particularly with regard to employee contracts or those leaving the business. In this article we answer some of the most frequently asked questions, helping to provide employers and managers with a better understanding of the calculations behind annual leave entitlement.

Firstly, let’s cover the basics

The legislation provides a basic annual leave entitlement of 4 weeks. If the normal working week is 5 days, the employee entitlement is 20 days. However, if the normal working week is 6 days, the annual leave entitlement is 24 days.

There are 3 different methods for calculating the duration of the annual leave entitlement.

  1. Based on the employee’s working hours in one year. An employee who has worked at least 1,365 hours in the leave year is entitled to the maximum of 4 working weeks’ annual leave.
  2. By allowing 1/3 of a working week for each calendar month in which the employee has worked at least 117 hours.
  3. 8% of the hours worked in the leave year, subject to a maximum of 4 weeks.

How do you calculate holiday pay?

Firstly, if the employee is paid by salary or by time rate, the amount due for one week of annual leave will be the amount paid to him/her for a normal working week prior to the commencement of holidays.

In cases whereby the amounts are variable for a normal working week (i.e. commission), the average of the last 13 weeks immediately prior to taking the leave should be used to calculate the amount.

This payment includes any regular allowance and bonus but does not include overtime.

What are the holiday pay entitlements when my employee leaves?

When your workers leave a job they must receive pay for any statutory leave they are entitled to in the current leave year but have not taken. You can calculate this using our convenient Annual Leave Days Calculator below.

You will need to consider the total annual leave in days, the total amount worked in months and the amount of leave taken in days. The calculator will display the number of days due to the employee upon leaving the business.

 

Can annual leave be carried forward to the following leave year?

The employer must ensure that employees take their annual leave entitlement within the leave year or, in exceptional circumstances, within six months of the following year with the employee’s agreement. It is the responsibility of the employer to ensure that employees take their full statutory leave allocation within the appropriate period.

Can an employer pay in lieu of annual leave?

The Act does not allow an employer to pay an employee in lieu of annual leave. The Act only provides for payment in lieu of annual leave where the employment relationship is terminated.

Please get in touch if you have any further questions with regard to annual leave entitlement and we’ll be glad to assist you.

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