Holiday Pay Calculations UK: What Employers Must Pay in 2026

Holiday pay is one of the most common sources of employment tribunal claims in the UK. Most employers know the basics: 5.6 weeks' statutory holiday per year. But what does that actually mean for pay calculations, and how do you handle workers whose hours vary?

The rules changed significantly in January 2024. If you employ part-year workers or irregular hours workers (including zero hours workers), you need to know what changed and how to apply the new rules.

The Statutory Holiday Entitlement: The Basics

All workers are entitled to a minimum of 5.6 weeks' paid annual leave per year. For a full-time worker doing five days a week, this equals 28 days per year.

The 5.6 weeks breaks down as:

4 weeks (20 days for full-time): the basic entitlement under the Working Time Directive
1.6 weeks (8 days for full-time): the additional UK entitlement

These two "pots" of leave were treated identically for most purposes from 2024.

Bank holidays: There is no statutory right to paid bank holidays on top of the 28-day entitlement. Whether bank holidays are in addition to or included within the 28 days depends on what the employment contract says. Most UK employers include bank holidays within the 28 days (so 20 days of annual leave plus 8 bank holidays). Check your contracts.

Above statutory minimum: You can offer more than 5.6 weeks. Many employers offer 25 or 30 days plus bank holidays. The statutory rules set the floor, not the ceiling.

How to Calculate Holiday Pay

Holiday pay must reflect a worker's normal remuneration. It cannot simply be based on basic salary if the worker regularly earns additional payments on top.

Following the Supreme Court decision in Flowers v East of England Ambulance Service Trust (2019) and subsequent cases, holiday pay must include:

Regular overtime (whether voluntary or not, if it is regular and part of normal pay)
Regular commission (if it forms a regular and substantial part of remuneration)
Shift allowances and other regular supplements

Holiday pay based on basic salary only, where a worker regularly earns substantial additional sums, is legally wrong and opens the employer to backdated holiday pay claims.

The 52-Week Reference Period

For workers with variable pay, holiday pay is calculated using a 52-week reference period: the average weekly pay over the previous 52 weeks (excluding weeks with no pay).

From April 2020, the reference period for the Working Time Regulations calculation was extended from 12 weeks to 52 weeks. This is the current rule.

How to calculate:

Take the worker's total pay (including regular overtime, commission, etc.) for the previous 52 weeks
Divide by 52 (or by the number of weeks worked, if fewer than 52 weeks have been worked)
The result is the average weekly pay
For each week of holiday taken, pay the average weekly pay

For a salaried employee with no variable pay, holiday pay is simply their normal weekly salary. The complexity arises for workers with variable remuneration.

The 2024 Changes: Part-Year and Irregular Hours Workers

The most significant recent change to holiday pay came from the Working Time (Amendment) Regulations 2023, effective 1 January 2024.

Who Is Affected?

Irregular hours workers: Those whose contractual hours are wholly or mostly variable (including many zero hours workers).

Part-year workers: Those employed for only part of the year (for example, term-time workers).

What Changed?

Before 2024, the Supreme Court ruled in Harper Trust v Brazel (2022) that part-year workers (including term-time workers) were entitled to 5.6 weeks of holiday even if they only worked for part of the year. This meant some part-year workers received holiday pay that was disproportionate to their hours worked.

The 2024 amendment changed the calculation method for irregular hours and part-year workers:

Accrual method: Irregular hours workers and part-year workers accrue holiday at a rate of 12.07% of hours worked in each pay period. This method ensures that holiday entitlement is proportionate to hours worked.

The 12.07% figure comes from: 5.6 weeks divided by (52 minus 5.6) = 5.6/46.4 = 12.07%.

Rolled-up holiday pay permitted (from 2024): Employers of irregular hours and part-year workers can now pay rolled-up holiday pay, which was previously prohibited. Under rolled-up holiday pay, the holiday pay is added to the worker's regular pay for each pay period (as a percentage of earnings), rather than being paid separately when the worker takes leave.

Rolled-Up Holiday Pay: How It Works

If you use rolled-up holiday pay for irregular hours workers:

Add 12.07% to the worker's regular pay in each pay period
Clearly identify the holiday pay element on payslips (it must be transparent and labelled)
The worker still has the right to take time off (they cannot be required to work through all their entitlement)
The worker cannot receive additional holiday pay when they take leave (they have already been paid it)

Rolled-up holiday pay is only permitted for irregular hours workers and part-year workers from 1 January 2024. It is not permitted for employees with fixed, regular hours.

Calculating Holiday for Part-Time Workers

Part-time employees' holiday entitlement is calculated on a pro-rata basis, based on the number of days or hours they work each week.

Example:

Full-time entitlement: 28 days (including 8 bank holidays)
Part-time worker works 3 days a week: 3/5 x 28 = 16.8 days

Round up to the nearest half-day (never round down).

Important for bank holidays: A part-time worker who does not work on Mondays is entitled to a proportionate adjustment if bank holidays fall on Mondays and reduce their entitlement below the pro-rata minimum. Check how your contract handles this.

Holiday Pay on Termination

When an employee leaves, they are entitled to be paid for any accrued but untaken holiday. This must be included in their final pay.

For a leaving date during the holiday year, calculate how much holiday they have accrued (pro-rata based on the proportion of the holiday year worked) and deduct how much they have already taken. Pay any positive balance.

If they have taken more holiday than they have accrued, you can make a deduction from final pay, but only if your contract includes a clear clause permitting this (a "claw-back" or "overpayment of holiday" clause).

Holiday Carry-Over

The statutory entitlement to 4 weeks' leave (the EU-derived entitlement) can carry over into the next leave year where the employee could not take it because they were on sick leave, maternity leave, or another form of statutory leave.

The additional 1.6 weeks' UK entitlement does not automatically carry over in the same way. Your contract may allow it, or you may require it to be used by the end of the holiday year.

From COVID-19 provisions (largely expired), there are limited carry-over rights in some circumstances. The main current carry-over rights are for sickness and statutory leave absence.

Practical rule: Review untaken leave balances regularly. Avoid large carry-over liabilities by managing leave through the year.

Holiday During Sick Leave

A worker continues to accrue holiday entitlement while off sick. They can request to take holiday while on sick leave (and be paid holiday pay instead of SSP). They cannot be required to use holiday while on sick leave if they do not want to.

If a worker is off sick for a long period and has accrued significant untaken holiday, they have the right to carry over up to four weeks of the EU-derived entitlement for up to 18 months after the end of the leave year in which it accrued.

Holiday Pay Common Mistakes

Mistake 1: Calculating holiday pay on basic salary only

If your workers receive regular overtime or commission, their holiday pay must reflect this. Use the 52-week reference period to calculate an average.

Mistake 2: Not applying the 12.07% accrual method for zero hours workers

For irregular hours workers from 1 January 2024, use the 12.07% accrual rate in each pay period, not a fixed number of days per year.

Mistake 3: Rolled-up holiday pay for regular employees

Rolled-up holiday pay is only lawful for irregular hours workers and part-year workers from 2024. Applying it to employees with regular hours is not permitted.

Mistake 4: Rounding down entitlement

Always round holiday entitlement up, never down.

Mistake 5: Not paying out accrued holiday on termination

Failure to pay accrued untaken holiday on termination is an unlawful deduction from wages claim. It is one of the most common tribunal claims. Calculate it accurately and pay it promptly.

Mistake 6: Treating bank holidays differently for different employees

Apply bank holiday treatment consistently within worker categories. Be careful with part-time workers on different days: they may be disproportionately disadvantaged if your bank holiday policy is not adjusted.

Holiday Pay Quick Reference

| Worker Type | Entitlement | Calculation Method | |---|---|---| | Full-time (5 days/week) | 28 days | Fixed entitlement | | Part-time (3 days/week) | 16.8 days | Pro-rata (3/5 x 28) | | Zero hours / irregular hours | 12.07% of hours worked | Accrual in each pay period | | Part-year worker | 12.07% of hours worked | Accrual in each pay period | | Variable pay worker | Average weekly pay x weeks taken | 52-week reference period |

FAQ: Holiday Pay UK

Do workers on zero hours contracts get holiday pay?

Yes. Zero hours workers have the same statutory entitlement to paid annual leave as employees with regular hours. From 1 January 2024, their entitlement accrues at 12.07% of hours worked in each pay period, which ensures it is proportionate to hours actually worked.

Can I require staff to take holiday on specific dates?

Yes, subject to giving appropriate notice. The employer can require an employee to take holiday at a specific time (for example, over Christmas shutdown) by giving at least twice as much notice as the leave being required. The employee cannot refuse, but the employer should check the contract and that this would not breach any relevant agreement.

What if an employee refuses to take their holiday?

You can direct employees to take holiday with appropriate notice. An employee who does not take their holiday by the end of the leave year loses it (unless they were prevented from taking it by sickness or statutory leave). You cannot pay out untaken holiday in lieu of leave during employment: the right to take time off is a health and safety right, not just a pay right.

How do I calculate holiday pay for a worker paid commission only?

Use the 52-week reference period: the average weekly earnings from commission over the previous 52 weeks. If the worker has worked fewer than 52 weeks, use the average of the weeks they have worked.

What is the carry-over rule for sick leave and holiday?

A worker who could not take their statutory annual leave because of sickness can carry over the EU-derived entitlement (4 weeks) for up to 18 months after the end of the leave year in which it accrued. The additional 1.6 weeks of UK entitlement does not carry over in the same way under the current rules.

Does holiday pay include pension contributions?

No. Holiday pay is the worker's normal pay during the leave period. Pension contributions continue to be calculated on the normal pay basis. Holiday pay itself does not attract additional pension contributions unless your pension scheme rules specifically require it.

Get Your Holiday Pay Process Checked

Holiday pay underpayment is one of the most common sources of employment tribunal claims, and claims can go back years. If you have not reviewed your holiday pay calculations since 2024, you may have a liability.

EmployerKit Audit from £49. We review your holiday pay calculations and flag any issues before they become claims.

Last updated: April 2026