I find that an odd way to do it too. Our insurers work on projected payroll costs for each section of the company eg, office cleaning, admin, window cleaning, carpets etc regardless of number of staff. I don't suppose it matters as long as you are covered.
Regarding hol pay 4.8 weeks pro rata is the minimum allowed for any employee, that is the basis to work it out on whether they are working 1hour per week or 100. Sort of know where you got stuck explaining yourself though, many people get confused.
Fox