Holiday pay calculation under UK law

Holiday pay calculation in the UK is straightforward in principle — every worker is entitled to 5.6 weeks’ paid leave a year — but quickly becomes complex once shifts, overtime and commission are part of the picture. The 2024 Working Time Regulations reforms reintroduced rolled-up holiday pay for irregular and part-year workers, but only for them, and only on tightly defined terms.

Getting it right matters: holiday pay is one of the most common sources of employment tribunal claims, and underpayments can stack up across years of back pay. This guide sits within our wider payroll and HR guidance and walks through entitlement, what counts as a week’s pay, and how to handle workers whose hours vary.

Statutory entitlement

The statutory minimum is 5.6 weeks per year (28 days for a 5-day week, including bank holidays if the employer chooses). Many employers offer more. For the full set of accrual, carry-over and part-time rules, see our companion guide to holiday entitlement and holiday pay.

Bank holidays can be inside or outside the 5.6 weeks at the employer’s discretion, but the contract must say which. There is a statutory cap of 28 days, so an employer is never obliged to provide more than 28 days even where the working week is longer than five days.

What goes into a “week’s pay”

Following the Bear Scotland line of cases, regular non-discretionary pay must be included. This is where many payroll teams get caught out, because basic salary alone often understates what a worker normally earns.

The distinction between the first 4 weeks of leave (derived from EU law, where the wider definition of pay applies) and the additional 1.6 weeks (domestic leave, which can be paid at basic rate) is a long-standing complication. From April 2024 the regulations allow the two pots to be treated as a single block where employers prefer simplicity, but the wider definition of a week’s pay remains the safer default.

For a worker with irregular hours, you take the average pay over the previous 52 paid weeks (excluding unpaid weeks), not 12, since the 2020 reform. Accurate hour records are essential here — see our guidance on timesheet management for keeping the underlying data clean enough to average reliably.

The 2024 reform: rolled-up holiday pay

For leave years starting on or after 1 April 2024, employers can pay irregular-hours and part-year workers 12.07% on top of their hourly rate, paid at the same time as normal wages. This is rolled-up holiday pay — banned generally since 2006 but now legalised for these specific groups.

• Available only for irregular-hours and part-year workers
• Must be shown as a separate line on the payslip
• Must be 12.07% (or whatever percentage matches the contract’s leave entitlement)
• Cannot be used for fixed-hours full- or part-time workers
• Holiday must still be allowed even though paid in advance
• Documented in the employment contract clearly

Whether a worker falls into the “irregular hours” category turns on the facts of how they actually work, which overlaps with broader questions of employment status. Misclassifying a fixed-hours worker as irregular and rolling up their pay is a common, and costly, mistake.

Closing thoughts

Holiday pay disputes are easier to prevent than fix. Pair this with our PAYE Real Time Information article and the employer National Insurance guide. The GOV.UK holiday entitlement guide has the latest detail. See pricing for payroll that calculates 52-week averages automatically.