Holiday smoothing artificially inflates the wage cost of shifts by the statutory 12.07% throughout the year, while ensuring paid holiday bookings have no impact on wage costs. This has the effect of spreading the wage cost of paid holiday evenly over time, instead of seeing a spike in wage costs when holiday is taken.
❗️ Holiday smoothing is a setting which only applies to wage cost calculations in Cost Control, rotas and other associated reports. It does not affect payroll reports or timesheets.
👀 Find out more in our Spotlight Session 'Harnessing the power of 'holiday smoothing''.
A worked example
Let's take you through a simple example to illustrate how it works:
Employee 1 takes paid holiday on Monday
Employee 2 works on Monday to cover employee 1's shift
Under normal circumstances, Monday's wage cost would be the sum of employee 1's holiday pay and employee 2's shift pay.
With holiday smoothing enabled, Monday's wage cost is only employee 2's shift pay. The wage cost of employee 1's other shifts (throughout the course of the year) are marginally higher because the cost of their holiday has been factored in.