How to calculate holiday pay for staff?

Marine de Roquefeuil

, Payroll Content Expert

Last updated on December 16, 2025

6 mins

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Key takeaways

Here’s a quick summary of the main points covered in this guide on holiday pay calculations:

Statutory entitlement: Most UK workers are entitled to a minimum of 5.6 weeks of paid holiday per year, regardless of their working pattern.
Normal vs. basic pay: Pay for the first 4 weeks of leave must be based on normal remuneration (including regular overtime and commission), while the remaining 1.6 weeks can be paid at the basic rate.
Rules for irregular workers: Legislation effective since April 2024 allows rolled-up holiday pay (at 12.07%) for irregular and part-year workers.
Reference period: The calculation for average pay generally looks back at the last 52 weeks of work to ensure fair compensation.
Inclusion of extras: Regular payments such as bonuses and overtime must be included in calculations to ensure workers aren’t financially disadvantaged for taking leave.

Calculating holiday pay can be complex, especially following recent UK reforms regarding irregular hours and rolled-up pay. This guide breaks down the essential rules for the 2025/26 tax year to help you correctly determine holiday entitlement and pay for all staff categories.

How to process leave payments in the UK?

Processing holiday pay correctly depends on the worker's contract type. Broadly, staff fall into two categories: Regular staff (fixed hours) and Irregular/part-year staff (zero-hours, seasonal).

Summary of entitlement and pay processes

The table below outlines how to calculate entitlement and pay for different worker types:

Worker category	Leave entitlement	Holiday pay calculation
Regular staff (fixed hours, full/part-time)	5.6 weeks per year (max. 28 days for a 5-day week).	First 4 weeks: Paid at normal remuneration (includes regular overtime and commission). Remaining 1.6 weeks: Paid at basic rate (or normal rate).
Irregular staff (zero-hours, seasonal)	12.07% of hours worked in the pay period.	Option A (rolled-up): Pay 12.07% uplift on every payslip. Option B (accrued): Build up leave entitlement and pay when taken (based on 52-week average).

You can use our holiday entitlement slider to work out entitlement for people who are on less than full-time hours:

Annual leave calculator

How many days a week does your employee work?

Minimum entitlement:

28 days

Calculation Specifics

Regular staff: Statutory minimum is 5.6 weeks. For a standard 5-day week, this is 28 days.
Normal remuneration (first 4 weeks): This rate must reflect what a worker normally earns. It goes beyond base salary to include variable pay elements like commission, regular overtime, and shift allowances, so workers aren’t penalized for taking their core leave. This was established by EU Law, and is still effective in the UK.
Basic rate (remaining 1.6 weeks): This refers strictly to the fixed pay agreed in the contract (base salary/hourly rate), excluding variable extras. However, many employers choose to pay the full 5.6 weeks at the normal rate for simplicity, and to offer an attractive, enhanced employee benefits package. This was introduced by the UK Working Time Regulations.
52-Week reference: For irregular workers not on rolled-up pay, or when calculating averages, use a 52-week reference period (looking back up to 104 weeks if necessary to find paid weeks).

Calculating annual leave for your staff

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What are other scenarios of holiday pay calculations in the UK?

Use this handy checklist to quickly navigate common but complex holiday pay situations:

Variable earnings? Use the 52-week reference period. If pay varies, calculate the average weekly pay based on the last 52 paid weeks. If needed, look back up to 104 weeks to find 52 weeks of usable data.
Part-time workers? Pro-rate entitlement. Multiply their weekly hours or days by 5.6. For example, a 3-day week equals 16.8 days of leave. Pay is calculated proportionally to ensure fairness.
Long-term sick or new starters?
- Sick leave: Look back up to 104 weeks to find 52 weeks of earnings data.
- New starters: If employed for less than 52 weeks, calculate the average over the weeks they have actually worked.
Fixed hours but irregular pay (bonuses/commission)? You must include regular overtime, bonuses, and commission in the 52-week average calculation. If it’s a regular part of their income, it counts towards normal remuneration.
Shift workers (varying rates)? Calculate average weekly pay (total remuneration over 52 weeks ÷ 52) and average weekly hours (total hours ÷ 52). Divide the average pay by average hours to determine the hourly holiday rate.
Piecework (per task pay)? Calculate the average hourly rate earned over the reference period and multiply by the holiday hours taken.

Holiday pay cases in law

There have been several legal cases in recent years that have looked to highlight the issues surrounding holiday pay.

Lock vs British Gas

One of the most prominent was Lock vs British Gas. The dispute centred on Mr Lock, a sales consultant for British Gas, who claimed that he was owed money on the basis that his holiday pay was not reflecting what he would have earned from the results-based commission.

The Court of Appeal’s ruling in October 2016 stated that holiday pay must include compensation for any results-based commission that would have been ordinarily earned by a worker.

Bear Scotland vs Fulton

Another prominent case regarding holiday pay is Bear Scotland v Fulton.

Mr Fulton claimed that Bear Scotland Ltd had made unjustified deductions from his wages by not including overtime and other payments associated with his work in calculating holiday pay due to him.

The courts agreed, and the Employment Appeal Tribunal (EAT) ruled in November that 2014 that regular overtime, which employees are required to perform if requested to do so by their employer, should be included for holiday pay purposes.

Harpur Trust vs Brazel

The Harpur Trust v Brazel was another significant case. The court ruled that holiday pay for staff employed to work only part of the year should be calculated using an employee’s average earnings over a 12-week period and not pro-rated.

How can payroll software help with holiday pay calculations?

Holiday pay calculations can be complex, but the right payroll software makes it effortless.Advanced payroll platforms can instantly look back up to 104 weeks to retrieve the 52 weeks of pay needed for accurate calculations. The system then calculates the average daily rate automatically, eliminating the need to comb through spreadsheets or perform manual calculations. Simply switch on the toggle, at the company level or employee level, and the software takes care of the rest.

Modern payroll solutions also offer a suite of features to empower employees to manage their leave. Employees can log time off and watch their payslips update in real-time. Leave and pay becomes completely transparent, as employees can view detailed breakdowns of their calculations and rates directly in their employee portal.

Key features to look for in holiday pay-ready payroll software:

Automated 52-week reference period tracking (up to 104 weeks lookback)
Real-time average daily rate calculations
Toggle-based controls for company or individual employee settings
Employee self-service leave management
Transparent calculation breakdowns in employee portals
Instant payslip updates reflecting leave changes.

Discover how modern payroll software can transform your holiday pay management from a compliance headache into a seamless, automated process.

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Summary

How to process leave payments in the UK?
- Summary of entitlement and pay processes
- Calculation Specifics
What are other scenarios of holiday pay calculations in the UK?
Holiday pay cases in law
How can payroll software help with holiday pay calculations?

A guide for businesses

Download PayFit's guide

Frequently asked questions (FAQs) about holiday pay

Yes, employers can choose to include bank holidays as part of a worker’s statutory annual leave of 5.6 weeks. There is no statutory right to time off on public holidays, so it is up to the employer whether to include these days within the minimum entitlement or give them in addition to it. If a worker works on a bank holiday, there is no automatic right to extra pay, but they may be entitled to a day off in lieu depending on their employment contract.

If a staff member leaves your employment, you must pay them for any statutory holiday entitlement they have accrued but not taken. This is calculated by working out their total entitlement for the year, pro-rating it for the time worked, and deducting any leave already taken. This ‘payment in lieu’ is legally required, and this is generally the only circumstance where statutory holiday can be exchanged for cash.

Yes, for leave years starting on or after 1 April 2024, rolled-up holiday pay is lawful for irregular hour and part-year workers. This method involves paying an additional 12.07% of the worker’s total pay in every pay period to cover their holiday entitlement. It is crucial that this amount is itemised separately on the payslip so the worker can clearly see how much holiday pay they are receiving.

Yes, for the 4 weeks of leave derived from EU law, holiday pay must be based on ‘normal remuneration’. This means that payments such as regularly paid overtime, commission, and bonuses must be included in the calculation to ensure the worker is not financially disadvantaged by taking leave. The remaining 1.6 weeks of statutory leave can be paid at the basic rate, though many employers choose to pay the entire 5.6 weeks at the normal rate for simplicity.