Pay received by employees during their annual leave.
Holiday pay is the payment employees receive when taking their statutory or contractual annual leave. In the UK a worker is entitled to a week's pay for each week of statutory leave they take, so the whole question is what "a week's pay" means for the pattern they actually work. Fixed hours and fixed pay make it a week of their normal pay; shift work and irregular hours are averaged over the previous 52 paid weeks. The rate is split too — at least 4 of the 5.6 weeks must be paid at a "normal" rate that includes commission and regular overtime.
Workers are entitled to a week's pay for each week of statutory leave that they take. That sentence is the whole entitlement, and every dispute about holiday pay is really a disagreement about the second half of it. A week's pay is worked out according to the kind of hours someone works and how they are paid for those hours, which means three workers taking the same Monday off can be owed three different amounts.
For regular hours and fixed pay, full- or part-time, a week's pay is simply the worker's pay for a week. For shift work with regular hours it is the average number of weekly fixed hours worked in the previous 52 weeks, paid at their average hourly rate. For irregular-hours and part-year work it is average pay from the previous 52 weeks, counting only weeks in which they were actually paid.
| Working pattern | How a week's pay is calculated |
|---|---|
| Regular hours, fixed pay | The worker's pay for a week |
| Shift work, regular hours | Average weekly fixed hours over the previous 52 weeks, at their average hourly rate |
| Irregular hours or part-year | Average pay from the previous 52 weeks, counting only weeks in which pay was paid |
Statutory leave is 5.6 weeks, but it is not all paid at the same rate. For regular-hours workers an employer must pay at least 4 weeks of the statutory entitlement at the worker's "normal" rate of pay, and the remaining 1.6 weeks at a "basic" rate. Paying the whole 5.6 weeks at basic rate underpays the first four weeks; paying it all at normal rate simply costs more than the law requires. Neither is a compliance disaster, but only one of them is what the rules actually say.
What counts as "normal" is the part worth reading twice. It includes commission, regular overtime payments, and any payments related to length of service or professional qualifications. It does not usually include bonus payments. A worker whose earnings are half commission and who is paid holiday at base salary alone is being underpaid for at least four weeks of every year, and the shortfall is invisible on a payslip that shows only a daily rate.
For irregular-hours workers and those who work part of the year, the split does not apply at all: all of their leave must be paid at their normal rate of pay.
Regular hours: 4 weeks at the "normal" rate (including commission and regular overtime) + 1.6 weeks at the "basic" rate. Irregular-hours and part-year workers: all 5.6 weeks at the normal rate.
Rolled-up holiday pay means folding an amount for holiday into the hourly rate instead of paying it when leave is taken. For regular-hours workers, full- or part-time, an employer cannot do this. The uplift-in-the-rate approach that many hourly contracts still describe is not available for staff on settled hours.
Employers can use rolled-up holiday pay for irregular-hours and part-year workers — unless that worker's leave year began on or before 31 March 2024, in which case they cannot. The leave year start date, not the worker's type alone, is what decides it, and it is the detail most likely to be wrong in a payroll configured once and left alone.
When an average is required, only weeks in which pay was actually paid are counted. If no pay was paid in a given week, count back another week, so that the average always rests on 52 weeks in which the worker was paid. The look-back is capped: an employer can count back a maximum of 104 weeks to find those 52. If a worker has less than 52 weeks of pay, use the average pay rate for the full weeks they have worked.
A week normally runs Sunday to Saturday, and another seven-day period should only be used where that is genuinely how the worker's pay is calculated. For monthly-paid staff, average hourly pay for the month is found by dividing the month's pay by the hours worked in it, multiplied by weekly hours to give a week's pay, and that weekly figure is then averaged across the last 52 weeks.
From 6 April 2026, employers must keep detailed records of annual leave and holiday pay for a minimum of six years from the date they were made — including the number of annual leave days taken and how much holiday pay was paid. Employers can choose how to create and keep those records, but may have to pay a fine if they cannot show that they keep them.
For at least 4 of the 5.6 weeks, yes. Employers must pay regular-hours workers at least 4 weeks of their statutory entitlement at their "normal" rate of pay, which includes commission, regular overtime payments, and payments related to length of service or professional qualifications. The remaining 1.6 weeks may be paid at a "basic" rate. Bonus payments are not usually included. Irregular-hours and part-year workers must have all of their leave paid at the normal rate.
Only for some workers. An employer cannot use rolled-up holiday pay for regular-hours workers, full- or part-time. They can use it for irregular-hours and part-year workers, unless that worker's leave year began on or before 31 March 2024. So the same practice can be lawful for one colleague and unlawful for another depending on the pattern worked and when the leave year started.
By averaging the previous 52 weeks, counting only weeks in which you were actually paid. Where a week has no pay, the employer counts back a further week to keep the average based on 52 paid weeks, going back a maximum of 104 weeks. If you have worked fewer than 52 weeks, the average is taken over the full weeks you have worked.
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