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Holiday Pay

Your entitlement to paid annual leave is a minimum of 5.6 weeks per year. The funding for your holiday pay is included in your contract rate, and we offer different processing options based on your preference.

Paid in advance

If you opt for your Holiday Pay to be “Paid in Advance,” it implies that it will be included in each payment you receive upfront. This means that we will be disbursing all the income available to you in advance, considering your gross taxable pay, before you take any time off.

Consequently, you will not receive any payment while you are on vacation or not working, as all the available income has already been paid to you. You have the flexibility to modify your holiday pay preference at any time by providing a written request.

Each year, you will have a statutory holiday entitlement of 28 days, which includes 20 days of annual leave and 8 Bank and Public Holidays. The holiday pay is already factored into the Contract Rate you agree upon with your agency or end client. To calculate your pay, we convert it to a percentage using the following formulas:

For non-education sectors:
28 days / 232 days (260 working days per year – 28 holiday days) = 12.07%

For the education sector (working in line with term times):
28 days / 192.5 days (260 working days per year – 28 days of annual leave and school holidays) = 14.54%

We use the appropriate holiday percentage to calculate your holiday entitlement for each hour or day you have worked. If your contract specifies a different holiday allowance, we will ensure that the correct percentage is applied. There are two methods through which we can pay your holiday funds to you.

Retained

Your Holiday Pay can be retained in a designated ‘Holiday Fund’ and paid out when you take time off work. We hold back this amount before tax, which is then taxed when it is disbursed to you based on the duration of your annual leave.

Holiday pay can be released in different ways, such as the amount accrued in a single pay period, a combination of accruals, or as a lump sum.

For instance:

– £45.50 holiday pay retained in Tax Week 1
– £65.50 holiday pay retained in Tax Week 2
– £45.50 holiday pay retained in Tax Week 3

If the individual is not working in Week 4, they can request:

– The value of an individual week (e.g., £45.50)
– A combination of the accrued weeks (e.g., weeks 1 and 2 = £111)
– The total accrued amount (£156.50)

If you wish to change your holiday pay option, please get in touch with our payroll team via email. If you have an accrued pot, the total retained amount will be visible on your payslips, and we can confirm the overall value. To receive payment for your holiday pay, you will need to make a request via email.

Please be aware that there is no financial distinction in receiving your holiday pay in one way or another. It solely depends on personal preference, and the total income you receive throughout the year will remain unchanged. Additionally, we must distribute holiday pay in the tax year it was earned, so there is no tax advantage in either option.

Please note that holiday pay can only be disbursed on your regular payday. For instance, if you typically receive payment on Fridays, any holiday pay requests will also be processed on that day. If you decide to leave SmartWork, any accumulated holiday pay balances will be paid out to you.

It is important to mention that any remaining funds must be paid out within the same year they were accrued. Our holiday year aligns with the calendar year, from January to December, rather than the tax year.

If you have any inquiries or require further assistance regarding holiday pay and its procedures, please do not hesitate to contact our onboarding team. They are available to provide guidance and address any concerns you may have.

What are the differences between the two holiday pay options, and what are the consequences of choosing either option?

Your contract rate already includes a percentage for holiday pay. How you receive this portion of your income is up to you.

Overall, the total income you receive throughout the year will remain the same. There is no financial advantage to choosing one holiday pay option over the other; it is purely a matter of personal preference. Additionally, we are required to pay out the holiday pay in the same tax year it was earned, so there is no tax benefit to either option.