This article explains how to calculate holiday pay for UK workers, including those with regular hours and those with variable pay, under the Working Time Regulations and the rules in force from 1 January 2024. A companion article, "Holiday entitlement and accrual: a guide for employers," covers how much leave staff are entitled to and how it builds up.
How is holiday pay calculated for workers with regular hours and fixed pay?
For workers with regular hours and fixed pay, whether full-time or part-time, holiday pay is simply their normal pay for the period of leave. A worker on a fixed monthly salary who takes a week off receives the same pay as normal, so no separate calculation is needed. The principle is that a worker should not lose out financially for taking holiday. Where regular-hours workers have shift premiums built into their normal working, those premiums should be reflected in their holiday pay. The calculation only becomes complex when hours or pay vary, which is where the 52-week reference period comes in.
What is the 52-week reference period and when must I use it?
The 52-week reference period is the method for working out a week's pay for workers whose pay varies, such as those on irregular hours, variable pay or term-time contracts. You look back over the previous 52 weeks in which the worker was paid and average the pay to produce a week's holiday pay. A week normally runs Sunday to Saturday, and the reference period starts from the last complete week ending on or before the first day of leave. Only weeks in which the worker was actually paid count, so any week with no pay is skipped and you count back a further week to reach 52. Weeks of sick leave, maternity or other family-related leave, and weeks containing only statutory payments are also excluded.
How far back can I go to reach 52 weeks of pay data?
There is a cap of 104 weeks. You count back only as far as needed to gather 52 weeks of paid data, but never beyond the 104 complete weeks before the first day of holiday. If, after counting back the full 104 weeks, fewer than 52 paid weeks are found, the reference period is shortened to however many paid weeks exist. For instance, a worker paid in only 40 of the last 104 weeks has their holiday pay averaged over those 40 weeks. Where a worker has been employed for less than 52 weeks, the reference period is shortened to their weeks of employment, and where they have not yet completed a week, you pay an amount that fairly represents their pay for the leave.
Which payments must be included when calculating holiday pay?
From 1 January 2024 the components of normal pay are set out in regulations, and the four weeks of leave derived from EU law must be paid at this normal rate. Normal pay must include: payments, including commission, that are intrinsically linked to performing tasks the worker is contractually obliged to carry out; payments relating to professional or personal status, such as allowances for length of service, seniority or qualifications; and other payments, such as overtime, that have been regularly paid in the 52 weeks before the calculation date. Regular overtime, commission and results-based commission must therefore be reflected in holiday pay. Whether a bonus is included depends on its nature, and normal pay does not usually include one-off bonuses or reimbursement of expenses incurred only while working.
What is the difference between normal and basic rate of pay for holiday?
UK statutory leave is made up of two pots: four weeks derived from EU law and an additional 1.6 weeks under UK law, giving 5.6 weeks in total. For regular-hours workers, employers must pay at least the four weeks at the worker's normal rate, which includes commission, regular overtime and status-related payments, and may pay the remaining 1.6 weeks at the basic rate, stripped of bonuses and extras. The regulations do not say which pot must be used first, and many employers pay the whole 5.6 weeks at the normal rate to reduce admin. If you do pay the pots at different rates, explain this clearly and consistently in the contract or handbook. For irregular-hours and part-year workers, all leave must be paid at the normal rate.
How do I calculate a week's pay for a worker paid monthly with variable pay?
For a monthly-paid worker whose pay varies, you cannot simply average the last twelve payslips, because twelve months does not line up with the 52-week reference period. Instead you work in weeks. First calculate the worker's average hourly pay for the relevant month by dividing the month's pay by the hours worked that month, then multiply that hourly rate by the hours worked in each week to get a weekly figure. You build up 52 such weekly figures, using records of hours to split pay correctly where a week straddles two monthly pay periods, and exclude any unpaid weeks. The average of those 52 weekly figures is the week's holiday pay.
What is rolled-up holiday pay and when is it lawful?
Rolled-up holiday pay means adding an amount to each payslip to cover holiday pay, instead of paying the worker when they actually take leave. It is calculated as 12.07% of the worker's total pay in each pay period, that uplift being the proportion of 5.6 weeks of leave to the 46.4 working weeks of the year. Following the reforms, rolled-up holiday pay is lawful only for irregular-hours and part-year workers, and only for leave years beginning on or after 1 April 2024. It remains unlawful for regular-hours workers, whether full-time or part-time. It is also not available to irregular-hours or part-year workers whose leave year began on or before 31 March 2024, until that leave year renews.
How must rolled-up holiday pay be shown and paid?
If you use rolled-up holiday pay, you must calculate the uplift on the worker's total pay in the pay period and pay it at the same time as the pay for the work done. The 12.07% amount has to be itemised as a separate line on each payslip, and it is paid in addition to normal salary, which must itself be at or above the National Minimum Wage. Because moving to rolled-up pay may amount to a variation of contract, check the worker's contract and tell the worker before introducing it; for agency workers, the information must also go into the Key Information Document. The uplift is 12.07% of total pay regardless of differing hourly rates, so if a worker does some hours at a premium rate, it still applies to the combined total.
Should statutory payments such as Statutory Maternity Pay be included in holiday pay?
No. Statutory payments are payments for state-mandated leave, such as maternity leave, where the cost is partly met by the government, and holiday pay itself is not a statutory payment. Statutory payments should not be included in the 52-week holiday pay calculation. A week in which the worker received a statutory payment instead of normal pay should be excluded from the reference period, and you count back a further week to bring the total to 52 weeks of genuine pay data. This keeps holiday pay reflective of normal earnings from work rather than government-funded leave payments.
Can a worker be paid in lieu of holiday instead of taking it?
The only time someone can be paid in place of taking statutory leave, known as payment in lieu, is when they leave their job. While in employment, workers must actually take their statutory holiday and be paid when they take it, and an employer cannot buy out the statutory 5.6 weeks. If an employer offers more than 5.6 weeks, separate arrangements can be agreed for the extra contractual leave. The rule exists to ensure workers genuinely rest.
How is holiday pay calculated when a worker leaves their job?
When a worker leaves, you must pay for any statutory holiday accrued but not yet taken, pro-rated to the proportion of the leave year the worker was actually employed, measured in calendar days. Calculate the full annual entitlement, work out the proportion of the leave year in employment (days employed divided by days in the leave year, multiplied by 100), and pro-rate accordingly; for fixed-hours workers this is then converted into hours using the average working day. For example, a worker entitled to 28 days employed for 139 of the 365 days is in employment for 38.08% of the year, giving about 10.7 days. Deduct any holiday already taken, and pay the remaining days using the worker's average weekly pay over the relevant reference period. Payment in lieu must be made even if the worker is dismissed for gross misconduct.
What if a worker has taken more holiday than they had accrued when they leave?
If a worker has taken more leave than they were entitled to at the point of leaving, you must not deduct money from their final pay to recover the overpayment unless this was agreed beforehand in writing. The position should be set out in advance in the employment contract, company handbook or intranet. Without that prior written agreement, you cannot claw the value back from final wages. This makes clear, written holiday policies important for both untaken and over-taken leave.
What are the rules for redundancy, insolvency and TUPE transfers?
Where a worker is made redundant, they are entitled to be paid for any accrued but untaken holiday and for any holiday taken but not paid, calculated using the standard 52-week reference-period method. If the employer is insolvent, the worker can claim from the Insolvency Service's Redundancy Payments Service for accrued but untaken holiday and for holiday taken but unpaid, up to a maximum of six weeks, with the weekly amount capped under the Employment Rights Act. In a TUPE transfer, where employment is continuous, the worker can look back over pay received across the transfer, including before it, as part of their reference period. Where a contract is terminated and the worker re-hired on a new contract, the reference period for the new contract should not include paid weeks from the original one.
Where can I find official calculators and further help?
GOV.UK provides a holiday entitlement calculator at https://www.gov.uk/calculate-holiday-entitlement, and detailed guidance on calculating holiday pay for workers without fixed hours or pay. For how much leave staff are entitled to and how it accrues, see the companion article "Holiday entitlement and accrual: a guide for employers." The Advisory, Conciliation and Arbitration Service (Acas) offers free, impartial advice to workers and employers on disputes. Because individual contracts differ, check the relevant contract first and seek independent legal advice where a situation is genuinely uncertain.