What is Holiday Accrual?
Holiday accrual, sometimes known as accrued holiday, is the process through which employees build up their holiday entitlement in correlation with their worked hours.
Employees will start accruing holiday from their first day of employment in your company, until their last day. This includes days on which they’re off, including sick leave and caregiver leave.
What is Holiday Accrual Used For?
Holiday accrual is a legal concept that explains how an employee accumulates their right to paid annual leave throughout their employment lifecycle.
👉 Read our guide on annual leave in the UK
This also means that when an employee starts their employment in a company, they won’t immediately be due annual leave as it won’t have accrued. See below for an alternative way to holiday accrual.
However, it is also a concept used for handy situations, such as:
- When an employee starts their employment part-way through the year, holiday accrual helps pro-rate their holiday for the rest of the year
- When an employee leaves the company part-way through the year, holiday accrual also helps work out if they’re due any holiday pay in their final payslip.
- When an employee is on long-term leave such as caregiver leave, holiday accrual is used to work out how much holiday needs to be carried over to the following year.
The Working of Holiday Pay Accrual
Holiday pay accrual operates on a pro-rata basis in relation to an employee's work hours. Every hour of work contributes to an employee's accumulating holiday pay. The statutory minimum holiday entitlement for full-time employees in the UK is 28 days or 5.6 weeks per year, inclusive of bank holidays, applied proportionately to part-time workers.
For a full-time employee, based on the statutory amount of annual leave, they'll accrue approximately 2.33 days of holiday each month (28 days divided by 12 months). However, this accrual amount could vary depending on your own annual leave policy.
If you offer a more generous annual leave allowance, employees will accrue more holiday every month.
👉 Read our guide on how holiday pay works in the UK
How to Work Out Holiday Accrual
The most common way to calculate holiday accrual for employees is based on the anual leave allowance they’ll get in a year, divided by month. This calculation will give you what 1 month’s worth of holiday accrual an employee should get. To do so, apply the following formula: Number of annual leave days in a year / 12 months = 1 month’s worth of holiday accrual.
Alternatively, you can calculate holiday accrual for employees based on the number of hours they’ve worked in the year. This is a useful method for part-time, shift and zero-hour workers. Apply the following formula:
(Hours worked ÷ Full-time annual work hours) x Full-time annual holiday entitlement.
You’ll need to include all the employee’s worked hours, even overtime if it's contractually guaranteed. Read more about working out weekly pay.
Example: Mastering How to Work Out Holiday Accrued
Imagine an employee working 20 hours per week. The full-time work hours per year for this part-time contract are 1040 (20 hours x 52 weeks).
Given the UK statutory minimum holiday entitlement (5.6 weeks), the part-time annual holiday entitlement is 112 hours (5.6 weeks x 20 hours).
Consequently, for each hour worked, the employee accrues approximately 0.1077 hours of holiday (112 ÷ 1040).
💡 In Onfolk, holiday accrual is done automatically for you. This means that when an employee joins or leaves, their holiday accrual for the year will automatically be calculated.
An Alternative Option to Accrued Holiday: Full Holiday Allowances
The downside to a holiday accrual method for employees is employees can quickly get limited with the amount of time-off they can book, as it only accrues as the year goes by.
For a company, this can also come as a detriment as it may lead to many employees needing to book more holiday towards the end of the year, which could cause staff shortage issues.
As an alternative, some employers favour annual leave allocation, where employees receive their entire leave entitlement upfront at the start of the leave year (usually the 1st January).
This is particularly popular in startups as it enables employees to book holidays for times they may not have accrued sufficient holiday for.
The only risk to this is in the event an employee leaves part-way through the year and has taken more leave than they’ll have accrued. In that scenario, the holiday pay due would usually be deducted from their final pay.
FAQs: Understanding How Holiday Pay is Accrued and More
How is holiday pay accrued?
Holiday pay accrual is an ongoing process, accumulating proportionally as an employee works. For full-time employees, they typically accrue approximately 2.33 days of holiday each month.
What does accrued holiday mean?
Accrued holiday signifies the amount of leave an employee has amassed based on their worked hours.
How do I calculate the accrued holiday?
As explained earlier, to calculate annual leave accrual, divide the hours worked by the total annual work hours and then multiply the result by the annual holiday entitlement.
For monthly accrual, divide the number of annual leave days in a year by 12. This method will give you a month’s worth of holiday accrual.
Can I carryover my employees’ holiday?
As an employer, you do have a level of discretion over when holidays can be taken. However, this must align with the guidelines set by UK employment law. Although you can't obligate an employee to take their holiday at a specific time without a contractual provision, you can refuse a request provided you give as much notice as the holiday requested.
Onfolk Makes Managing Payroll and HR Simple and Stress-Free
The benefits of combined payroll and HR software is that you save a tonne of time with admin tasks relating to running your business all the while saving money on expensive accountants and HR consultants.
Onfolk is a modern, cloud-based platform built for startup founders and business owners employing a diverse team. Our platform combines a HR software as well as an almost fully automated payroll, so all your employee and pay data is in one place, accesible at all times.
As your employee data syncs automatically with your payroll, it takes 3 minutes every month to run. This also means you only need to keep one system updated, and your employee data and payroll are always free of discrepancies.
On top of being simple and fast to use, Onfolk provides you with other tools key to building your team effortlessly: time-off management tool, 2-click employee onboarding and offboarding, customisable task lists, integrations with Xero, Quickbooks and your pension provider, fully customisable people metric dashboards and reports, and so much more.
If you use Slack to communicate with your team, Onfolk integrates with Slack too - get reminders for employee birthdays and anniversaries, as well as who is joining soon or on holiday that week.
Running a business comes with so many hats - Onfolk takes care of payroll and people admin for you, so you can focus on growing your team and business instead.
What is Holiday Accrual?
Holiday accrual, sometimes known as accrued holiday, is the process through which employees build up their holiday entitlement in correlation with their worked hours.
Employees will start accruing holiday from their first day of employment in your company, until their last day. This includes days on which they’re off, including sick leave and caregiver leave.
What is Holiday Accrual Used For?
Holiday accrual is a legal concept that explains how an employee accumulates their right to paid annual leave throughout their employment lifecycle.
👉 Read our guide on annual leave in the UK
This also means that when an employee starts their employment in a company, they won’t immediately be due annual leave as it won’t have accrued. See below for an alternative way to holiday accrual.
However, it is also a concept used for handy situations, such as:
- When an employee starts their employment part-way through the year, holiday accrual helps pro-rate their holiday for the rest of the year
- When an employee leaves the company part-way through the year, holiday accrual also helps work out if they’re due any holiday pay in their final payslip.
- When an employee is on long-term leave such as caregiver leave, holiday accrual is used to work out how much holiday needs to be carried over to the following year.
The Working of Holiday Pay Accrual
Holiday pay accrual operates on a pro-rata basis in relation to an employee's work hours. Every hour of work contributes to an employee's accumulating holiday pay. The statutory minimum holiday entitlement for full-time employees in the UK is 28 days or 5.6 weeks per year, inclusive of bank holidays, applied proportionately to part-time workers.
For a full-time employee, based on the statutory amount of annual leave, they'll accrue approximately 2.33 days of holiday each month (28 days divided by 12 months). However, this accrual amount could vary depending on your own annual leave policy.
If you offer a more generous annual leave allowance, employees will accrue more holiday every month.
👉 Read our guide on how holiday pay works in the UK
How to Work Out Holiday Accrual
The most common way to calculate holiday accrual for employees is based on the anual leave allowance they’ll get in a year, divided by month. This calculation will give you what 1 month’s worth of holiday accrual an employee should get. To do so, apply the following formula: Number of annual leave days in a year / 12 months = 1 month’s worth of holiday accrual.
Alternatively, you can calculate holiday accrual for employees based on the number of hours they’ve worked in the year. This is a useful method for part-time, shift and zero-hour workers. Apply the following formula:
(Hours worked ÷ Full-time annual work hours) x Full-time annual holiday entitlement.
You’ll need to include all the employee’s worked hours, even overtime if it's contractually guaranteed. Read more about working out weekly pay.
Example: Mastering How to Work Out Holiday Accrued
Imagine an employee working 20 hours per week. The full-time work hours per year for this part-time contract are 1040 (20 hours x 52 weeks).
Given the UK statutory minimum holiday entitlement (5.6 weeks), the part-time annual holiday entitlement is 112 hours (5.6 weeks x 20 hours).
Consequently, for each hour worked, the employee accrues approximately 0.1077 hours of holiday (112 ÷ 1040).
💡 In Onfolk, holiday accrual is done automatically for you. This means that when an employee joins or leaves, their holiday accrual for the year will automatically be calculated.
An Alternative Option to Accrued Holiday: Full Holiday Allowances
The downside to a holiday accrual method for employees is employees can quickly get limited with the amount of time-off they can book, as it only accrues as the year goes by.
For a company, this can also come as a detriment as it may lead to many employees needing to book more holiday towards the end of the year, which could cause staff shortage issues.
As an alternative, some employers favour annual leave allocation, where employees receive their entire leave entitlement upfront at the start of the leave year (usually the 1st January).
This is particularly popular in startups as it enables employees to book holidays for times they may not have accrued sufficient holiday for.
The only risk to this is in the event an employee leaves part-way through the year and has taken more leave than they’ll have accrued. In that scenario, the holiday pay due would usually be deducted from their final pay.
FAQs: Understanding How Holiday Pay is Accrued and More
How is holiday pay accrued?
Holiday pay accrual is an ongoing process, accumulating proportionally as an employee works. For full-time employees, they typically accrue approximately 2.33 days of holiday each month.
What does accrued holiday mean?
Accrued holiday signifies the amount of leave an employee has amassed based on their worked hours.
How do I calculate the accrued holiday?
As explained earlier, to calculate annual leave accrual, divide the hours worked by the total annual work hours and then multiply the result by the annual holiday entitlement.
For monthly accrual, divide the number of annual leave days in a year by 12. This method will give you a month’s worth of holiday accrual.
Can I carryover my employees’ holiday?
As an employer, you do have a level of discretion over when holidays can be taken. However, this must align with the guidelines set by UK employment law. Although you can't obligate an employee to take their holiday at a specific time without a contractual provision, you can refuse a request provided you give as much notice as the holiday requested.
Onfolk Makes Managing Payroll and HR Simple and Stress-Free
The benefits of combined payroll and HR software is that you save a tonne of time with admin tasks relating to running your business all the while saving money on expensive accountants and HR consultants.
Onfolk is a modern, cloud-based platform built for startup founders and business owners employing a diverse team. Our platform combines a HR software as well as an almost fully automated payroll, so all your employee and pay data is in one place, accesible at all times.
As your employee data syncs automatically with your payroll, it takes 3 minutes every month to run. This also means you only need to keep one system updated, and your employee data and payroll are always free of discrepancies.
On top of being simple and fast to use, Onfolk provides you with other tools key to building your team effortlessly: time-off management tool, 2-click employee onboarding and offboarding, customisable task lists, integrations with Xero, Quickbooks and your pension provider, fully customisable people metric dashboards and reports, and so much more.
If you use Slack to communicate with your team, Onfolk integrates with Slack too - get reminders for employee birthdays and anniversaries, as well as who is joining soon or on holiday that week.
Running a business comes with so many hats - Onfolk takes care of payroll and people admin for you, so you can focus on growing your team and business instead.
