Holiday trading explained: a quick guide to smarter, more flexible benefits

Описание: Watch this bite-sized 15-minute webinar (plus Q&A) to discover how holiday trading can boost employee satisfaction while delivering real cost savings for your organisation.

What’s in this webinar?

*What is Holiday Trading? *

Holiday trading is a popular employee benefit that gives staff the chance to buy or sell extra holiday days [02:18].
Buying: Employees can typically buy up to five extra days. This is the most common option [02:47].
Selling: Offering the option to sell unused holiday is less common, often due to the difficulty for businesses in forecasting that cost [03:50], [15:53].

Scheme Mechanics: Calculating the Cost
The cost of a holiday day is established using the working day convention (260 working days in a calendar year) [03:03].
Formula: Individual's Salary / 260 days = Daily Rate
Example: A salary of £32,500 divided by 260 days results in a daily rate of £125 [03:10].
Payroll: The cost of any purchased holidays is usually spread over a 12-month period in equal monthly deductions from the employee's pay [04:26].

Contracts and Tax Implications
Holiday trading is treated similarly to a salary sacrifice arrangement, impacting both gross pay and employment contracts [04:49].
Tax Benefit (Buying): When an employee buys holiday, the cost is deducted from their gross pay (before tax and National Insurance, or NI) [05:11]. This means the net cost to the employee is lower than the full daily rate.
Tax (Selling): If an employee sells holiday, the amount is added to their gross pay, and they must pay tax and NI on that amount [05:32].
Employment Contract: Implementing the scheme is considered a contractual variation that requires formal agreement with the employee [05:45].

Benefits for the Employer
The scheme can offer significant financial savings for the employer [06:06].
National Insurance Savings: Because the employee's gross pay is reduced when they buy holiday, the employer saves on their own National Insurance contributions (up to 15% in the example given) [06:54].
Business Example: A hypothetical business with 200 employees, where 100 people buy an average of three days, could see a total reduction in payroll costs of over £43,000, including employer NI savings [06:46].

Overcoming Common Concerns
Need to Replace Resource: The concern that extra holidays will require hiring temporary staff is often overstated. Experience suggests employees become more efficient before going on leave [07:34].
Administration: Keeping the scheme simple—for example, offering a buy-only option once a year—can overcome administrative difficulties [08:38].

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