Additional Holiday Pay

From April 2020, the Government is changing the reference period for calculating holiday pay for employees who have pay which varies from month to month to 52 weeks.  To ensure the University is consistent with these new legislative requirements we are changing the reference period for calculating AHP from 3 months to 12 months. The reason we are introducing the new reference period from 1 October 2019 is that this is the start of the University’s holiday year and will ensure we are compliant by the time the law changes next year.

Case law (including British Airways v Williams [Sept 2011], Bear Scotland v Fulton [Nov 2015], Lock v British Gas [Oct 2016], Dudley Metropolitan Borough Council v Willetts [2017]) has established that holiday pay calculations must include certain additional remuneration, including commission payments and overtime (whether guaranteed, required or voluntary), provided they are “normal remuneration”.

The Employment Appeal Tribunal (EAT) has stated that such remuneration needs to be included only in relation to the four weeks annual leave derived from the Working Time Directive (‘Euro Leave’). The extra 1.6 weeks of annual leave under UK law can be calculated on the basis of basic pay only.

The effect of the rulings is that failure to factor in additional payments such as overtime (where they amount to normal remuneration) in the calculation of statutory holiday pay amounts to an unlawful deduction of wages under the Employment Rights Act 1996. The Deduction from Wages (Limitation) Regulations 2014, which came into force on 8 January 2015, limits such claims to a period of two years from the date on which the worker presents his or her employment tribunal claim.

The additional payments that qualify for AHP are listed below:

Please note:  You must also be contractually eligible to receive the qualifying additional payments to be paid AHP.

AHP is only paid for holiday booked using MyHR Dashboard.  The HR & Payroll system relies on knowing all payments and all holiday bookings to calculate when and how much AHP is due.  The calculation of AHP is fully automated and will not be manually administered by the HR and Payroll teams.

Therefore, it is important that your holidays are recorded in MyHR Dashboard.

If you (or a Faculty/Service representative) do not record your holiday via MyHR Dashboard the system will not be able to calculate any AHP Payments owing.

The University’s HR/payroll system automatically calculates AHP, however if you want to understand how an AHP payment you’ve received has been calculated you can use the same methodology as the system:

1.       Add together the qualifying payments paid to you in the previous 12 pay periods * to the month you took holiday in;

2.       Divide this figure by 12 to get a monthly average;

3.       Multiply this monthly average by 12 to get a yearly average;

4.       Divide the yearly average by 48 to get a weekly average;

5.       Divide your weekly average by the hours you work per week to get an hourly average;

6.       Multiply the hourly average by the amount of hours holiday you took that month

Please note: if you have not completed 12 months service, the system will use the calculation above but will use the overtime values in the payslips available (step 1), and then divide by the same number of pay periods available (step 2), thus giving a monthly average.  Steps 3 and 4 are incorporated to this calculation to cater for those with less than 12 months of payslips.

 *Note that the system may have to look at other pay periods to correctly calculate your AHP payment – see the FAQ below.

Because you are paid a standard basic salary every month (annual salary divided by 12) that payment will never change when you are on holiday.  Only the qualifying additional payments - those which can vary month on month and are not guaranteed - are assessed to ensure your monthly pay (salary, plus qualifying additional payments) is comparable to your previous twelve monthly salary payments.  The system works out a payment for each hour of holiday in relation to the previous twelve months’ qualifying additional payments and pays a sum based on the booked holiday.

If you qualify for AHP it is paid in the month you take the holiday (not when you book it).

Example 1: Part time employee (works 25 hours per week) books 50 hours holiday in October

This holiday booking prompts the system to review the previous twelve payslips for any relevant payments.  The following payments are identified:

Based on the information form the payslips the following calculation is made:

*Subject to system rounding

The employee will therefore receive £417.50 as an AHP payment in their October payslip.

Example 2: Full time employee (36 hours per week) books 72 hours (or 10 days) of holiday in October.

This holiday booking prompts the system to review the previous twelve payslips for any relevant payments. The following payments are identified:

Based on the information from the payslips the following calculation is made:

*Subject to system rounding

The employee will therefore receive £417.60 as an AHP payment in their October payslip.

No, and there are three reasons why:

1. If one of more of your previous twelve payslips have been a ‘nil’ (£0.00) payslip (due to a period of sickness, for example), those nil payslips will be skipped until the system finds twelve payslips which have more than £0.00 on them. This ensures that any periods where you were not paid are not assessed, ensuring that your AHP payment will not be unfairly reduced due to nil pay.
2. If you do not yet have twelve previous payslips, the system will create an average based on the number of payslips available.
3. If your holiday booking straddles more than one month, your entire holiday booking will be assessed against the twelve pay slips preceding the first month that includes booked holiday. Please be aware that this is the case even though the resulting payments will be paid separately, in their respective months. This also applies to separate bookings that together form a continuous period of absence.

No. AHP is only applicable to the portion of your holiday entitlement guaranteed under the Working Time Directive (equivalent to 4 weeks of holiday, or the pro rata equivalent if you’re part-time, see example below), and requires at least one of the qualifying additional payments to have been paid to you in at least one of the twelve payslips prior to the month in which your period of holiday occurs.

Please note, since 1st October 2020 Bank Holidays and University Closure days for part of your total holiday entitlement, those Bank Holidays and University Closure days booked will also attract an AHP assessment.

Full-time hourly booking example

Someone working 36 hours per week as a Level 1a-2b member of staff (1.0 FTE working 7.2 hours per day) will have a total annual holiday entitlement of:

• 0 years service:  20 days, 8 Bank Holidays, 6 University Closure Days = 34 days of paid time off equivalent              to 244.8 hours
• 1 years service:  21 days, 8 Bank Holidays, 6 University Closure Days = 35 days of paid time off equivalent  to 252.0 hours
• 2 years service:  22 days, 8 Bank Holidays, 6 University Closure Days = 36 days of paid time off equivalent  to 259.2 hours
• 3 years service:  23 days, 8 Bank Holidays, 6 University Closure Days = 37 days of paid time off equivalent  to 266.4 hours
• 4 years service:  24 days, 8 Bank Holidays, 6 University Closure Days = 38 days of paid time off equivalent  to 273.6 hours

For each year only 20 of days above (144 hours), or pro-rata equivalent for a part time member of staff, will attract an AHP assessment and possible payment. This includes those days booked as Bank Holidays or University Closure Days. The remaining days above 20 days or pro-rata equivalent will not be assessed for AHP.

No. As above, AHP is only applicable to the first 20 days (4 weeks) of holiday booked in any leave year or the pro rata equivalent for part-time staff. For full-time staff, this equates to 140 hours for Levels 3 and above and 144 hours for Level 1B-2B (pro-rata equivalent for part-time staff).

Part-time example – tailored for an employee who has the pro-rata equivalent of 24 days (172.8 hours) holiday per year

Someone working 18 hours per week as a Level 1a-2b member of staff (0.5 FTE) will have a total annual holiday entitlement of 136.8 hours. 

12 days holiday per year (86.4 hours)
4 Bank Holidays (28.8 hours) and
3 University Closure days (21.6 hours). 

Only the first 72.0 hours this total annual holiday entitlement will attract an AHP assessment, and a possible payment.  This includes those hours where a Bank Holiday or a University Closure Day is booked off.  The other 64.8 hours of the annual holiday entitlement do not attract an AHP assessment. 

This methodology is exactly the same for full-time staff – regardless of total annual holiday entitlement, the AHP assessment will only be done against the hourly equivalent of the first 20 days (4 weeks) of holiday booked in any leave year.

Payment will appear automatically on your payslip. Payments will only be paid when qualifying holiday is taken and qualifying additional payments have been made in the previous twelve months. Where someone has several AHP payments in one month due to several instances of holiday, the amounts will only show as one payment on the payslip.

The payment will be shown on your payslip as ‘Ad Hol Pay’.

A sample payslip can be viewed here.

No, AHP is not pensionable in any of the University’s pension schemes, in accordance with the rules of the relevant pension schemes.

Yes, AHP is classed as earnings for Tax and NI purposes.  Any AHP paid will be added to the rest of your pay and Tax and NI will be calculated accordingly.

Because the AHP payment is assessed in the month in which the holiday is taken, it is possible that the status of a future-dated holiday booking will display as ‘Pending’.

If the holiday booking is made in the current payroll month, it is likely that the assessment will happen immediately and no ‘Pending’ status will show.

Please remember: all authorised holiday requests will continue to show in blue on the Absence Management main calendar; all unauthorised holiday requests which will continue to show in green on the Absence Management main calendar.

Not always. The calculation of AHP payments takes place as part of the payroll cycle and there is a mid-month cut-off each month, after which payments are carried over into the following payroll month. This means that if you book and take a period of leave at the end of a month, AHP may not be assessed until the following month’s pay cycle.

A list of payroll cut-off dates can be found here.

Yes, it is possible that we will change the assessment period from the previous three payslips to a longer assessment period, once the solution has been in place for 12 months. We are using a three month assessment period initially so as not to delay the implementation of AHP.

Please be assured that any changes will be completely transparent when implemented and we will of course contact all people affected.

Any changes of this kind will have to be done for the start of any leave year (1 October).

All payments are aligned exactly with your holiday bookings.  When you edit or delete the holiday absence in MyHR Dashboard, the payment which has already been paid will be adjusted in the following pay period.

If you were to cancel the holiday, the payment which was previously paid to you will be reclaimed in the next pay cycle.

If you adjust the holiday (increase or decrease the holiday period), the payment will be adjusted accordingly in the next pay cycle.

There are two reason why you might not have been paid AHP against a period of holiday:

1. The most likely scenario is that you have already taken off the days/hours of holiday that can qualify for an AHP payment.  You are only entitled to receive AHP against the amount guaranteed under the Working Time Directive (equivalent to the first 4 weeks or pro rata of your holiday entitlement). 
2. If you work more than one post/contract, a pro-rata portion of your leave for each posts can qualify for an AHP payment.  As above, please check that you have not already taken the portion of leave in that post eligible for AHP, but also check that the qualifying payments you received were for the post you took leave for.

Each month an assessment is done by the HR/payroll system on all absence records to assess if AHP is due.  This includes all months within the current entitlement year and possibly some from the previous entitlement year. 

A number of factors might require previous AHP payments you have received to later be adjusted (either up OR down), these include but are not limited to:

• Changes to your work pattern and hours of work per week
• Changes in your holiday entitlement
• Retrospective payments made to previous pay periods
• Last minute or retrospective holiday booked on MyHR
• Holiday bookings retrospectively cancelled

If you have any questions relating to a positive or a negative AHP payment you were not expecting please raise a new issue on ServiceNow.

It is possible that an overall adjustment is required at the end of an entitlement year. If this is done, it is likely that payments adjustments might be necessary for AHP that was paid throughout the year. If this is necessary, you will be contacted by the HR Systems team to advise you of any potential changes to your AHP payments.

AHP payments are recognised by the Department of Work and Pensions as salary and will be reported to HMRC as forming part of your monthly salary. Therefore, you must be aware that this could have an effect on any means tested benefits.

Please contact the Department of Work and Pensions or the relevant agency if you have any questions about your benefits.