Holiday entitlement and the Working Time Directive

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How 'inclusive' holiday entitlement is calculated

You can download a small Excel tool from here that lets you work out how an employer adopting this practice will handle your rate - and what you will lose in the process.

These calculations, carried out by an employer to reach a freelancer's contractual rate, are often bewilderingly confusing to the freelancer.

As an example, take a freelancer with a normal rate of £800 a week.

He works a ten-week contract. Normally this would be a total of 10 x £800 a week = £8000 for the contract.

He is working 5 days a week, totalling 50 days. 50 divided by 13 = 3.8 rounded up to 4 days. This is the paid holiday the freelancer is entitled to within that time.

If the freelancer has agreed with the employer that his agreed rate will be inclusive of holiday pay, the employer then calculates that your normal total rate for the ten week contract has to be stretched to cover ten weeks plus four days paid holiday, rather than just ten weeks, so it works out a new weekly rate based on the total fee for the contract (£8000) divided by the total number of weeks which it actually has to pay you (10 weeks 4 days ie 10.8 weeks:)

£8000 / 10.8 = £740.74 per week

This is the revised figure that appears in your contract.

If you take no paid holiday time off, your holiday pay in lieu would equal 4 days x £148.15 = £592.60.

Add your holiday entitlement to the total weekly rate over the ten weeks:

£7407.40 + £592.60 = £8000

which is back to your previous, full rate, without holiday pay.



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