What's covered in this guide?:
What is leave averaging?
UK law says that holiday pay for employees with variable hours or pay must be based on their average pay. This is worked out over a 52-week reference period, looking back up to 104 weeks if needed. This is known as the holiday reference period.
Workforce has two ways to do this:
Automated leave averaging: Workforce works out the average for each leave request automatically.
Leave Averaging Calculator: you work out the average yourself for a specific employee, and choose which weeks to include.
Automated Leave Averaging
Automated leave averaging uses Workforce timesheets to work out the hours and pay for each leave request.
Workforce uses the employee’s last 52 weeks with pay, looking back up to 104 weeks to find them.
If there are fewer than 52, for example because the employee is new, it uses the weeks it finds.
A week only counts if the employee was paid that week and didn’t take any leave. Weeks with leave, or without pay, are skipped.
Only approved timesheets are used.
A day of leave is paid at the employee’s average day: their total pay and hours in those weeks, divided by the number of days they worked.
Note: For more details on the law, see:
Set Up Automated Leave Averaging
To set up automated leave averaging:
Go to Time & Attendance > Leave and click View Leave Types.
Create a new leave type, or edit an existing one.
Under Costing Configuration, tick Apply leave averaging.
Save your changes.
Once enabled, Workforce will automatically calculate averages when:
A leave request is submitted manually.
A leave request is generated automatically (e.g. bank holidays).
Past shifts or leave requests are updated and affect averages.
Automated Leave Averaging on Timesheets
Once it’s turned on, Workforce works out the average when:
a leave request is created
a leave request is created automatically, for example for a bank holiday
past shifts or leave requests are changed in a way that affects the average
⚠️ Important: Leave averaging only works for leave types shown in hours. It can’t be used with leave shown in days.
Leave Averaging Calculator
Use the calculator to check an average yourself, or to choose exactly which weeks to include.
It looks back over up to 104 weeks, or however long the employee has worked, if less.
52 weeks are recommended. You’ll see a warning if you select more or fewer.
Weeks are flagged and left out automatically if the employee wasn’t paid that week, or took leave.
Apply Leave Averaging
Open the calculator. Go to the employee’s staff profile and select Leave Averaging from the left-hand menu.
Check the reference period. A table shows each week, with:
week number
dates
pay
hours worked
a tick box to include or exclude the week (excluded weeks show an orange warning)
You can select all the recommended weeks at once, or clear your selection.
Review the averages. You’ll see:
the length of the request (in days or weeks)
the cost of the leave for that period
average pay per day or week
average hours per day or week
average days worked per week
total pay and hours for the selected weeks
a warning if you haven’t selected 52 weeks
Adjust if needed. Include or exclude weeks to make sure the average is fair, for example to leave out an unusually quiet or busy period.
FAQs
What is the holiday reference period?
What is the holiday reference period?
The weeks used to work out average holiday pay. Workforce uses the last 52 weeks with pay, looking back up to 104 weeks to find them.
Which weeks are included?
Which weeks are included?
Weeks where the employee was paid and didn’t take any leave, from approved timesheets.
What if my employee doesn’t have enough timesheet history?
What if my employee doesn’t have enough timesheet history?
Leave averaging only uses approved timesheets with pay. If an employee is new to Workforce, you can either:
Import their past timesheets using the timesheet import template. Enter one shift for each day worked. If you only know their total weekly hours, split them across the days they worked. Make sure the imported shifts are approved, and that the employee had pay conditions for those dates.
Turn off averaging for them. If only some employees need averaging, create a separate leave type with Apply leave averaging turned off, and set each employee’s contracted weekly hours and days. Workforce uses these to work out a day of leave. For example, 22.5 hours over 3 days is 7.5 hours a day.
Does it work for monthly-paid employees?
Does it work for monthly-paid employees?
Yes. Averages are worked out from weekly timesheet data, whatever the employee’s pay frequency.
What if my employee was furloughed?
What if my employee was furloughed?
Furloughed weeks are only left out automatically if they’re recorded as leave, or if the employee wasn’t paid that week. Otherwise, untick them in the calculator.
What about seasonal employees?
What about seasonal employees?
Use the calculator to include or exclude weeks, so the average reflects their seasonal work fairly.
Should bonuses, tips or commission be included?
Should bonuses, tips or commission be included?
This is up to you as the employer. ACAS has guidance on this, but the final decision is yours.
Does leave averaging change how much leave employees accrue?
Does leave averaging change how much leave employees accrue?
No. The accrual rate stays the same. Leave averaging only changes the hours and pay of each leave request.
Why can’t I turn on leave averaging for my leave type?
Why can’t I turn on leave averaging for my leave type?
Leave averaging only works for leave types shown in hours. If the leave type is shown in days, leave averaging is turned off.
Compliance Disclaimer
The Workforce Leave Averaging features are designed to comply with UK holiday pay legislation (as of March 2020), with guidance from ACAS.
We provide the best possible calculation based on Workforce timesheet data, but for unique or complex cases, we recommend seeking professional advice from ACAS or an employment law specialist.