Cost of extra holidays

[Andy Cheever]

How would you calculate the true extra cost of increasing all company employee's annual holiday entitlement from 22 to 24 days (not including statutory and bank holidays) assuming the following parameters: 100 employees, total salary cost (not including employer's NI ) �2,000,000, company turnover �26,000,000 and anything else to take into consideration?
Thanks.

AC

[factor-fiction]

May not cost anything! Would you have to recruit extra staff to cover teh lost hours? If so, how many?

[Andy Cheever]

No extra staff, we have a good overall team who we feel sure would absorb the "stand-in" duties required of them for the extra 2 days they get.

AC

[Twenty20]

Well, it would obviously cost more in terms of lost production for the 200 days a year extra that you'd be paying them for not being at work.

There are several ways you could work out a rough cost - the simplest would be to take the average salary, take it back to a cost per day and multiply that by 200. Or, if the staff are on chargeable hours, work out the daily charge out rate and multiply by 200.

[factor-fiction]

Yes it all depends on what assumptions you make. I think Andy is suggesting the staff will absorb the current workloads into their slightly shorter working day, so if production doesn't fall and additional staff aren't needed then the cost is zero.
I thinks it's a dangerous argument, though, in that staff might then want even more holidays and at some point there has to be an impact. I would say the figure is somewhere between zero and that suggested by Twenty20's rough calculation.
What is the purpose of the calculation- who needs the figure?

[Andy Cheever]

factor30

The company's owners before they make a decision or not to increase the number of days

[factor-fiction]

To be on the safe side I suggest they should assume that there is a cost equivalent to 1% of the current paybill- ie around �20,000 a year. This will allow for any increased staff costs/overtime to cover the lost hours.

[Andy Cheever]

Twenty20's calculation + employer's NI gives �17,354, which I think is at least mininmum cost. Factor30's 1% is probably nearer the mark with "hidden extras".
Thanks all, I will now go argue the toss.

AC