We have recently introduced, as one of our flexible working options, a Compressed Working Week Scheme.  Employees who are now working this compressed week have queried how we are going to calculate their annual leave and public holiday entitlements.  How do I handle it?

Answer:

In relation to this matter, there are two issues to be considered - the hours to which a person is entitled in respect of an annual leave / public holiday day and the pay to which they are entitled for the same days.  I will deal with both issues separately as outlined below:

Calculating annual leave entitlement for employees on a compressed working week

Generally speaking, the holiday entitlement for anyone working a non-standard week should be expressed in hours rather than days.  Therefore, let’s take it, for example, that the standard week in your organisation is 38.7 hours over 5 days.  Employees working compressed hours will work the same number of hours but maybe over 4 days instead of 5 days.

Therefore, the formula to calculate annual leave entitlements for employees working the compressed working week is:

Annual leave entitlement in days x hours of standard working day = annual leave entitlement in hours

Therefore, in the case of a 38.7 hour working week, that formula would be calculated as follows (taking 20 days annual leave as the entitlement):

20 days x 7.75 hours (i.e. the standard working day if working over 5 days) = 155 hours of annual leave

Therefore, each time the employee takes a day off, the number of hours they would usually work on that day would be deducted from their overall pot of 155 hours.  So, for example, if the employee took their long day of 10 hours off for the day of annual leave, that 10 hours would be deducted from the 155 hours of annual leave.

Alternatively, you could ignore the fact that they work one long day and you could average out the 38.7 hours over the 4 days which they work which means each day would be worth 9.69 hours.  Therefore, each time they take a day of annual leave, regardless of whether it is a long day or otherwise, they could have 9.69 hours deducted from their overall pot of 155 hours.

Calculation of pay for annual leave

In terms of determining how to pay an employee for annual leave, the Organisation of Working Time (Determination of Pay for Holidays) Regulations, 1997, differentiate between normal weekly rate of pay and appropriate daily rate of pay.

In terms of normal weekly rate of pay, where employees are paid a salary, then the normal weekly rate of pay is the sum paid in respect of the normal weekly working hours last worked by the employee before the annual leave commences.

In terms of the daily rate of pay, the 1997 Act states that the rate of that which is proportionate to the normal weekly rate.  Therefore, it would seem appropriate to pay them one fifth of their normal weekly salary in respect of the single day’s annual leave.

Calculating public holiday entitlements in hours

The same principle for public holidays can be applied as annual leave above.  In other words, the normal working day for a person working 38.75 hours over a 5 day is 7.75 hours.  They are entitled to 9 statutory public holidays and therefore that is equivalent to an additional 69.75 hours in public holiday leave.  Therefore, an employee working a compressed working week has a bank of 69.75 hours for the 9 statutory public holidays.

If the public holiday falls on a day in which they would otherwise work 10 hours, then they will use up that bank of hours sooner than an employee working a 5 day working week.  Therefore, they may end up owing the organisation hours which could be averaged out over their other agreed working days.
 

Calculating pay for public holidays

In terms of calculating pay for public holidays, as discussed, the relevant Regulations outlined above make a distinction between employees who are normally required to work on a public holiday and those who are not.  Where no employee is required to work on a public holiday, as the organisation closes for each public holiday, their pay in respect of the public holiday is calculated as follows:

One fifth of the sum paid in respect of the normal weekly hours last worked by the employee before the public holiday

Employers introducing flexible work options, such as this compressed working week, should have very clear Policies and Procedures in place ensure that all issues have been considered in advance of granting the flexible working option to any employee.

Once flexible working arrangements have been introduced, employers will have to keep in mind that refusal of flexible working options to some employees may give rise to discrimination issues pursuant to the Employment Equality Legislation.  Therefore, every request for a flexible working option, and every decision to grant/refuse such an option, must be handled thoroughly and carefully to ensure full compliance.