How to Calculate Holiday Pay

/Published:1st September 2026/inBusiness, Employees, Limited Company, Running a business
Accounting Wise - how to calculate holiday pay in the UK

Get 50% off our services for the first 6 months when you sign up to one of our Pre-Built or Bespoke Packages!

Calculating holiday pay correctly is an important payroll responsibility for UK employers. While the calculation is straightforward for many salaried employees, it can become more complicated when workers receive overtime, commission or variable pay, or when they work irregular hours or only part of the year.

UK workers are generally entitled to 5.6 weeks of paid annual leave each year. For someone working five days a week, this normally means 28 days of paid holiday. Part-time workers receive the same 5.6 weeks, adjusted according to the number of days they normally work.

However, holiday entitlement and holiday pay are two different things. Holiday entitlement determines how much time off a worker can take, while holiday pay determines how much they should receive while taking that leave.

This post goes over how to calculate holiday pay in the UK in 2026 and beyond, including calculations for salaried employees, part-time staff, irregular-hours workers, overtime and commission, rolled-up holiday pay and employees leaving your business.

What Is Holiday Pay?

Holiday pay is the amount an employee or worker receives when taking paid annual leave.

The underlying principle is that taking statutory holiday should not normally leave a worker financially worse off than if they had continued working. This means employers may need to consider more than an employee’s basic salary when calculating certain periods of holiday pay.

Under the UK statutory holiday entitlement rules, almost all workers are entitled to 5.6 weeks of paid annual leave each year.

This includes many:

  • full-time employees;
  • part-time employees;
  • agency workers;
  • casual workers;
  • zero-hours workers;
  • irregular-hours workers; and
  • part-year workers.

Self-employed individuals who are genuinely running their own business generally do not have statutory holiday rights.

How Much Paid Holiday Are Employees Entitled To?

Most workers are legally entitled to 5.6 weeks of paid annual leave.

For an employee working five days per week, the basic calculation is:

5 days × 5.6 weeks = 28 days of statutory annual leave

There is a statutory cap of 28 days. Therefore, someone working six days each week is not automatically entitled to 33.6 days of statutory leave.

Employers can provide more generous contractual holiday entitlement if they choose.

Do Bank Holidays Count Towards the 28 Days?

Yes. Employers can include UK bank holidays within the statutory 5.6-week entitlement.

For example, a business might provide:

  • 20 days of annual leave chosen by the employee; plus
  • 8 bank holidays.

This gives 28 days in total.

There is no general statutory right to have bank holidays off work. Whether an employee is entitled to take a bank holiday off, or receive additional pay for working it, will usually depend on their employment contract.

How to Calculate Holiday Pay for Salaried Employees

Holiday pay is usually simplest for employees who work regular hours and receive a fixed salary.

If an employee earns the same amount each month and works regular hours, they will normally continue receiving their usual salary when taking annual leave.

Example: Fixed Monthly Salary

Suppose an employee earns £36,000 per year and works Monday to Friday.

Their gross monthly salary is:

£36,000 ÷ 12 = £3,000 per month

If the employee takes a week’s annual leave during September, they would ordinarily still receive their normal £3,000 gross salary for that month.

You do not normally deduct a week’s salary and replace it with a separate holiday payment.

How to Calculate a Week’s Holiday Pay

For statutory holiday purposes, workers are entitled to a week’s pay for each week of statutory annual leave they take.

The calculation depends on the worker’s working arrangements.

According to GOV.UK guidance on holiday pay, the main approaches are:

  • Regular hours and fixed pay: use the worker’s normal week’s pay.
  • Shift work with regular hours: calculate the average weekly fixed hours worked during the relevant 52-week period at the worker’s average hourly rate.
  • Irregular-hours or part-year work: holiday pay is generally based on average pay over the previous 52 paid weeks, unless eligible rolled-up holiday pay is being used.

This distinction is important because simply multiplying contracted hours by the basic hourly rate will not always produce the correct holiday pay figure.

What Must Be Included in Holiday Pay?

For regular-hours workers, statutory annual leave effectively consists of two elements. At least four weeks must be paid at the worker’s normal rate of pay, while the remaining 1.6 weeks can generally be paid at their basic rate of pay.

Normal remuneration can include more than basic wages.

Depending on the worker’s circumstances, employers may need to include:

  • regular overtime;
  • commission linked to contractual duties;
  • payments intrinsically linked to the work the employee is required to perform;
  • payments relating to professional or personal status;
  • payments based on seniority or length of service; and
  • certain other payments that have regularly been made during the preceding 52 weeks.

Bonuses require more careful consideration because whether they form part of holiday pay depends on the nature of the bonus and how it relates to the worker’s normal remuneration.

Employers should therefore avoid assuming that holiday pay is always calculated using basic salary alone.

 Outsourced PAYE Payroll Services for UK Businesses

Categories:

Get 50% off our services for the first 6 months when you sign up to one of our Pre-Built or Bespoke Packages!

Speak to an accounting expert

If you’re unsure what level of support you need, our friendly team are on hand to help you pick the right package for you.

0330 113 8442 Request Call Back

How to Calculate Holiday Pay Including Regular Overtime

Overtime is an area where employers can easily underpay holiday pay.

If an employee regularly works overtime, relevant overtime payments may need to form part of their normal holiday pay.

Example

Consider an employee whose basic weekly wage is £500 but who regularly receives approximately £100 of overtime each week.

If the overtime forms part of their normal remuneration, calculating relevant holiday solely on the £500 basic wage could result in an underpayment.

The employer may instead need to calculate the employee’s normal remuneration using the appropriate reference period, reflecting those regular overtime payments.

Acas provides further guidance on calculating holiday pay, including the types of additional payments employers should consider.

How to Calculate Holiday Pay for Part-Time Employees

Part-time employees have the same statutory entitlement of 5.6 weeks, but their entitlement reflects their normal working week.

For example, someone who works three days per week would normally receive:

3 days × 5.6 weeks = 16.8 days of statutory annual leave

If the employee receives fixed pay for those days, holiday pay will generally reflect what they would normally have earned while working.

Example

An employee works three days each week and earns £120 per day.

A full week of their annual leave represents three working days.

3 × £120 = £360

Subject to any additional elements that need to be included in normal remuneration, their holiday pay for that week would therefore be £360.

How to Calculate Holiday Pay for Irregular-Hours Workers

Different rules apply to workers whose paid hours are wholly or mostly variable under their contract.

For leave years beginning on or after 1 April 2024, statutory holiday entitlement for irregular-hours and part-year workers is generally accrued at 12.07% of the hours worked during each pay period.

The calculation is:

Hours worked × 12.07% = statutory holiday hours accrued

Example

Suppose a casual employee works 100 hours during a monthly pay period.

100 × 12.07% = 12.07 hours of holiday accrued

Employers need to apply the statutory rounding rules when recording the resulting entitlement.

The 12.07% figure comes from the relationship between 5.6 weeks of statutory holiday and the remaining 46.4 working weeks of a full year:

5.6 ÷ 46.4 × 100 = approximately 12.07%

If the employment contract provides more than the statutory 5.6 weeks, employers may need to use a higher accrual percentage.

GOV.UK provides detailed guidance on holiday entitlement and holiday pay reforms.

Using the 52-Week Reference Period

Where a worker does not have fixed hours or fixed pay, employers may need to calculate holiday pay using an average of the worker’s previous 52 paid weeks.

Weeks in which the worker received no pay are generally excluded. Instead, the employer looks further back to find another paid week.

An employer can generally look back up to 104 weeks to obtain the necessary 52 paid weeks.

If the employee has worked for the business for less than 52 weeks, the calculation should instead use the complete weeks for which the employee has been employed and paid.

Example of a 52-Week Average

Suppose an irregular-hours worker earned £16,900 during the relevant 52 paid weeks.

£16,900 ÷ 52 = £325 average weekly pay

A week’s statutory holiday would therefore ordinarily be paid at £325 under the 52-week reference method.

Employers should retain accurate payroll and working-hours records because calculating this retrospectively can otherwise become difficult.

What Is Rolled-Up Holiday Pay?

Rolled-up holiday pay is where holiday pay is added to a worker’s normal earnings during each pay period rather than being paid when the worker actually takes their holiday.

Following changes to the Working Time Regulations, employers can choose to use rolled-up holiday pay for qualifying irregular-hours and part-year workers.

It cannot generally be used for regular-hours workers.

Where rolled-up holiday pay is used, it must be calculated at a rate of at least 12.07% of the worker’s total pay during the pay period for statutory entitlement.

Rolled-Up Holiday Pay Example

Suppose an irregular-hours worker earns £1,500 during a month.

£1,500 × 12.07% = £181.05 holiday pay

The employee’s gross pay would therefore be:

£1,500 normal earnings + £181.05 holiday pay = £1,681.05

The £181.05 holiday pay should be clearly identified as a separate payment on the employee’s payslip.

Using rolled-up holiday pay does not remove the worker’s right to take annual leave. Employers must still ensure workers have the opportunity to take their statutory holiday.

Further guidance is available from Acas on rolled-up holiday pay.

Holiday Pay for Part-Year Workers

Part-year workers are people who are required to work only during certain parts of the year and have periods of at least one week during which they are not required to work and are not paid.

Examples might include some seasonal employees and certain term-time workers.

For qualifying part-year workers, statutory holiday entitlement is generally accrued at 12.07% of actual hours worked during each pay period for leave years beginning on or after 1 April 2024.

Employers can either calculate holiday pay using the appropriate 52-week reference period when leave is taken or, where permitted, use rolled-up holiday pay.

Employers should check employment contracts carefully because simply working during school terms or having periods without work does not automatically mean every employee should be treated in exactly the same way.

Holiday Pay When an Employee Starts Part-Way Through the Year

Employees joining during an existing holiday year will usually receive a proportion of the annual entitlement.

For regular-hours workers, employers can use an accrual system during the first year of employment. Under this method, the worker accrues one-twelfth of their annual entitlement at the beginning of each month.

Example

An employee working five days a week has an annual entitlement of 28 days.

After three months:

28 ÷ 12 × 3 = 7 days

The employee would therefore have accrued seven days of statutory leave.

Businesses can use the official GOV.UK holiday entitlement calculator where an employee starts or leaves part-way through a holiday year.

How to Calculate Holiday Pay When Someone Leaves

When an employee leaves your business, you need to calculate how much statutory holiday they have accrued up to their leaving date and compare this with the amount they have already taken.

If they have accrued unused statutory holiday, it must generally be paid in lieu as part of their final pay.

Example

Suppose an employee has accrued 18 days of holiday by their leaving date but has taken only 14 days.

18 days accrued – 14 days taken = 4 days outstanding

The employer would normally need to pay the employee for those four outstanding days.

Payment in lieu is generally permitted for statutory annual leave when employment terminates. Employers cannot normally pay employees instead of allowing them to take their statutory holiday while they remain employed, except where lawful rolled-up holiday pay arrangements apply to qualifying workers.

What If an Employee Has Taken Too Much Holiday?

If someone has taken more holiday than they have accrued when they leave, the employer may be able to deduct the excess from their final wages.

However, this should have been agreed in the employment contract or otherwise agreed in writing beforehand.

Making an unauthorised deduction could potentially result in an unlawful deduction from wages claim, so employers should check the contractual position before reducing final pay.

Holiday Pay During Sickness and Family Leave

Annual leave can continue to accrue while an employee is absent from work due to sickness or statutory family-related leave.

Specific carry-over rights can also apply where an employee has been unable to take their statutory annual leave because of sickness or family-related leave.

This is particularly important around maternity leave, adoption leave and other periods of statutory leave because employers should not assume that holiday entitlement stops accruing simply because the employee is temporarily away from work.

Can Employees Carry Holiday Into the Next Year?

Whether annual leave can be carried forward depends on the circumstances, the type of leave and the employer’s contractual holiday policy.

Where a worker receives 28 days of statutory leave, contractual arrangements may allow up to eight days to be carried forward in ordinary circumstances.

Separate statutory carry-over protections can apply where workers have been unable to take leave because of sickness or statutory family leave.

Workers may also acquire carry-over rights where an employer has failed to:

  • give them a reasonable opportunity to take their holiday;
  • encourage them to take their statutory entitlement;
  • inform them that untaken holiday could be lost at the end of the leave year; or
  • correctly provide rolled-up holiday pay where the worker was entitled to receive it.

This makes good communication around outstanding annual leave an important part of year-end payroll and HR procedures.

Holiday Pay and PAYE

Holiday pay is employment income and should normally be processed through payroll in the same way as other taxable earnings.

This means employers generally need to account for:

  • Income Tax through PAYE;
  • employee National Insurance contributions where applicable;
  • employer National Insurance contributions where applicable;
  • pension contributions where the payment forms part of qualifying pensionable earnings under the relevant scheme rules; and
  • other applicable payroll deductions.

Holiday pay should therefore be included in the employee’s payroll records and reported to HMRC through the employer’s normal Real Time Information (RTI) reporting processes.

Employers should ensure that payroll software is configured correctly, particularly where rolled-up holiday pay or variable remuneration is involved.

Holiday Pay Record-Keeping Requirements From April 2026

Record keeping has become particularly important for employers in 2026.

From 6 April 2026, employers are required to keep detailed records relating to annual leave and holiday pay for at least six years from the date the records were made. This duty was introduced under the Employment Rights Act 2025 and is enforced by the Fair Work Agency.

Records should cover information including:

  • annual leave taken by each worker;
  • holiday carried forward from previous leave years;
  • holiday pay paid;
  • details of what has been included within holiday pay, such as commission or other relevant payments; and
  • payments made in lieu of unused holiday, including when an employee leaves.

Employers can choose an appropriate record-keeping system. For many businesses, the required information will already be held within payroll, HR or time-tracking software.

However, employers should check that their existing systems capture enough detail to demonstrate how holiday entitlement and holiday pay have been calculated.

Failure to keep adequate holiday records is a criminal offence and can expose employers to enforcement action and potentially unlimited fines.

Common Holiday Pay Mistakes Employers Should Avoid

Holiday calculations can become surprisingly complicated once a workforce includes different contracts and working patterns. Some of the most common mistakes include:

  • Using basic pay for every calculation: regular overtime, commission and other payments may need to be included in normal holiday pay.
  • Confusing holiday entitlement with holiday pay: one determines the amount of leave, while the other determines what the employee receives while taking it.
  • Using 12.07% for everyone: the statutory accrual method applies specifically to qualifying irregular-hours and part-year workers, not as a universal calculation for all employees.
  • Using rolled-up holiday pay for regular employees: rolled-up holiday pay is restricted to qualifying irregular-hours and part-year workers.
  • Failing to separate rolled-up holiday pay: where used, it should be clearly shown separately on the payslip.
  • Ignoring unpaid weeks: when using a 52-week reference period, unpaid weeks generally need to be replaced by earlier paid weeks, subject to the 104-week look-back limit.
  • Forgetting holiday in final pay: accrued but untaken statutory leave usually needs to be paid when employment ends.
  • Making unauthorised deductions: deductions for excess holiday taken should be supported by the contract or prior written agreement.
  • Poor record keeping: employers now need detailed annual leave and holiday pay records and must retain them for at least six years.

Practical Holiday Pay Checklist for Employers

Before processing holiday pay, employers should check:

  • What is the worker’s employment status?
  • Does the worker have regular or irregular hours?
  • Are they a part-year worker?
  • How much statutory and contractual holiday are they entitled to?
  • How much leave have they already accrued and taken?
  • Does their normal remuneration include regular overtime, commission or other relevant payments?
  • Is a 52-week reference period required?
  • Is rolled-up holiday pay permitted and being calculated correctly?
  • Are holiday payments being processed correctly through PAYE?
  • Are annual leave and holiday pay records being retained for the required period?

A consistent process is particularly useful for businesses with casual, seasonal, hospitality, retail or shift-based employees, where individual working patterns can vary considerably.

What Happens If Holiday Pay Is Calculated Incorrectly?

Incorrect holiday pay can result in an employee being underpaid.

An employee should normally raise the issue with their employer first so that payroll records and calculations can be checked and any mistake corrected.

If the matter cannot be resolved, the worker may be able to bring a claim to an employment tribunal, including a potential claim for unlawful deductions from wages.

Employment tribunal time limits can be short. Historically, a worker generally had three months minus one day from the date of the most recent incorrect payment to begin the relevant process. Under the Employment Rights Act 2025, this time limit is being extended to six months from 1 October 2026. The extended limit applies where the relevant date, broadly the date of the incident or the last in a series of deductions, falls on or after 1 October 2026. Where the relevant events arose wholly before that date, the previous three-month limit continues to apply. Employers should therefore check which limit applies to the period in question.

Employers should therefore investigate payroll discrepancies promptly rather than allowing potential underpayments to accumulate.

Useful Holiday Pay Resources

Getting Holiday Pay Right

For employees with regular hours and fixed salaries, calculating holiday pay is often relatively simple. The employee normally continues receiving their usual salary while taking annual leave.

Calculations become more complicated when workers receive regular overtime or commission, have variable working hours, work only part of the year or leave employment with unused holiday outstanding.

Employers should identify the worker’s working pattern first, distinguish between holiday entitlement and holiday pay, use the correct calculation method and maintain clear records showing how each figure has been reached.

The 2026 record-keeping requirements also make accurate payroll records increasingly important. Employers should retain evidence of leave taken, leave carried forward, holiday payments and the elements included in those calculations for at least six years.

Where your workforce includes irregular-hours, part-year, seasonal or commission-based workers, getting professional payroll or accounting support can help ensure holiday pay is calculated consistently and correctly while reducing the risk of underpayments and employment disputes.

Holiday pay calculations can quickly become complex when your workforce includes irregular-hours, part-year, seasonal or commission-based workers, and the 2026 record-keeping rules leave little room for error. If you would like support getting your payroll and holiday pay right, our team can help. Call us on 0330 113 8442, book a free call back or build a quote to find out how Accounting Wise can take the pressure off your payroll.

Need help with your PAYE? Contact Accounting Wise Today!

Build Your Own Package Accounting Packages One Off Pricing

Calculating Holiday Pay FAQ

0330 113 8442 Request Call Back

The calculation depends on the employee’s working pattern. Regular salaried employees will usually receive their normal pay while on holiday. Workers with variable pay may require an average based on the previous 52 paid weeks. Different rules apply to qualifying irregular-hours and part-year workers.

Not always. For relevant statutory leave, normal holiday pay can include regular overtime, commission and certain other payments that are regularly received as part of the worker’s normal remuneration.

For qualifying irregular-hours and part-year workers, statutory holiday entitlement is generally accrued at 12.07% of actual hours worked during each pay period for leave years beginning on or after 1 April 2024. The percentage is based on 5.6 weeks of statutory leave relative to the remaining 46.4 working weeks.

No. Employers should not use 12.07% as a blanket holiday pay calculation for their entire workforce. Its use depends on the worker’s classification and whether you are calculating holiday entitlement or permitted rolled-up holiday pay.

Yes, but only for qualifying irregular-hours and part-year workers. Where statutory rolled-up holiday pay is used, it must generally be calculated at no less than 12.07% of total pay for the pay period and shown separately on the worker’s payslip.

Regular overtime can form part of normal remuneration and may therefore need to be reflected when calculating holiday pay. Employers should consider the worker’s actual pattern of earnings rather than relying automatically on basic contractual pay.

Yes. Statutory annual leave generally continues to accrue while an employee is off sick. Special rules can also allow statutory holiday to be carried into a later leave year where sickness prevented the employee from taking it.

Yes. Employees continue to accrue statutory annual leave while on maternity leave and other qualifying periods of statutory family leave.

Yes. Employees must generally receive payment for statutory holiday they have accrued but not taken when their employment ends.

From 6 April 2026, employers must keep detailed records of annual leave and holiday pay for at least six years from the date the records were made.

Glossary of Key Holiday Pay Terms

Statutory Annual Leave – The minimum paid holiday a worker is legally entitled to. In the UK this is 5.6 weeks per year, capped at 28 days for someone working five or more days a week.
Holiday Entitlement – The amount of paid time off a worker can take. This is separate from holiday pay, which is how much they receive while taking it.
Holiday Pay – The amount an employee or worker receives when taking paid annual leave, based on their normal remuneration rather than always their basic pay.
Normal Remuneration – A worker's usual earnings, which can include regular overtime, commission and other payments regularly received, not just basic salary.
Rolled-Up Holiday Pay – Holiday pay added to a worker's normal earnings each pay period rather than paid when leave is taken. Permitted only for qualifying irregular-hours and part-year workers and shown separately on the payslip.
12.07% Accrual – The statutory method for calculating holiday entitlement for irregular-hours and part-year workers. Based on 5.6 weeks of leave relative to the remaining 46.4 working weeks of the year.
52-Week Reference Period – The averaging method used to calculate holiday pay for workers without fixed hours or pay, based on their previous 52 paid weeks, looking back up to 104 weeks to find enough paid weeks.
Irregular-Hours Worker – A worker whose paid hours are wholly or mostly variable under their contract in each pay period.
Part-Year Worker – A worker required to work only part of the year, with periods of at least one week where they are neither working nor paid, such as some seasonal or term-time staff.
Accrual – The way holiday entitlement builds up over time, often at one-twelfth of the annual entitlement each month during a worker's first year.
Payment in Lieu – Payment made for accrued but untaken statutory holiday when an employee leaves, rather than allowing the leave to be taken.
Carry-Over – Moving untaken annual leave into the next leave year, which may be allowed by contract or protected by statute in cases such as sickness or family leave.
Bank Holidays – Public holidays that employers can choose to include within the 5.6-week statutory entitlement. There is no general statutory right to take them off.
PAYE (Pay As You Earn) – The system through which employers deduct Income Tax and National Insurance from earnings, including holiday pay, and report them to HMRC.
RTI (Real Time Information) – The system employers use to report payroll information, including holiday pay, to HMRC on or before each payday.
Unlawful Deduction from Wages – A claim a worker can bring where an employer has underpaid them, including underpaid holiday pay, subject to employment tribunal time limits.
HMRC – His Majesty's Revenue and Customs, the UK government body responsible for collecting taxes and administering PAYE.
Fair Work Agency (FWA) – The enforcement body introduced under the Employment Rights Act 2025, responsible for enforcing holiday pay record-keeping and related obligations.
Newsletter Subscription - Accounting Wise

Join Our Newsletter!

Get expert accounting tips, tax updates, and business insights straight to your inbox. Sign up today and stay one step ahead!

Newsletter Signup

Hot Topics

More related Accounting Community, News & Resources

Accounting Wise - Important Accounting Dates September 2026

Important Accounting Dates September 2026

Your month-at-a-glance guide to some of the key accounting and tax deadline falling in September 2026, from quarterly VAT returns and monthly payroll payments to corporation tax and the Economic Crime Levy, with practical advice for staying compliant.
Accounting Wise - How is Crypto Trading Taxed in UK

How is Crypto Trading Taxed in the UK

A overview on the taxation of cryptoassets in the UK fo, covering when Capital Gains Tax applies, the treatment of crypto-to-crypto disposals, the Income Tax position on mining and staking, company holdings, and HMRC reporting obligations.
Accounting Wise - How to Register for the CIS

How to Register for the CIS

Learn how to register for the Construction Industry Scheme (CIS), who needs to register, how CIS deductions work and the key deadlines you need to know. This guide covers CIS registration, gross payment status, monthly returns, penalties and practical tips for UK contractors and subcontractors.
Online Company Formation Experts - Formations Wise
Right Right Company Formation

Company Formation

Free company formation with our Pre-Built or Bespoke Accounting packages!

All Official Documents

Manage Your Company Online

London Registered Office Address

Your own limited company

Accounting Software

Whatever your size, our accounting software supports your business.

Quotes & Payment Reminders  

MTD VAT & CIS Returns 

Payroll Services & HR Support 

Unlimited Support & Advice 

Balance Accounting Software - The Balance App
Right Right Accounting Software
Rated Excellent on Trust Pilot - Accounting Wise Logo

Get started with the right accounting solution for your business

Build Your Own PackageAccounting PackagesOne Off Pricing

Contact Us

Interested in Accounting Wise?

Request Call Back0330 113 8442

Accounting Wise is a trading style of Accounting Wise Ltd, a limited company registered in England under company number 09365202. Our registered office is: The Carriages, Station Road, Ware, SG12 9PL UK.

Content is for general information only. Always take advice.

Important Accounting Dates September 2026Accounting Wise - Important Accounting Dates September 2026