What is holiday entitlement? UK employers guide for 2025/26

What is holiday entitlement?

Holiday entitlement, also known as annual leave here in the UK, is the amount of paid holiday time employees legally have a right to each year.

How much holiday an employee is entitled to will depend on a few factors, like whether they’re part-time or full-time (e.g. the number of days or hours they work), or whether they have additional agreements in place with you as their employer.

As with any type of leave, the specific terms of the employee contracts will outline when and how your employees can take their holiday.

How much is the legal holiday entitlement in the UK?

In the UK, the minimum holiday entitlement is 5.6 times the number of hours or days a staff member works in a week. So, a full-time worker who works five days a week would be entitled to 28 days (or five days x 5.6).

It’s important to note that 28 days is the maximum statutory entitlement an employee is entitled to. For instance, if you have employees working 6 or 7 days a week, their entitlement would be capped at 28 days (in other words, you won’t need to do the calculation).

That being said, companies can choose to offer their employees more leave if they desire and could even provide unlimited paid time off (PTO) as a benefit (but this has some pros and cons).

What are the recent reforms to holiday pay and entitlement about?

Current regulations have been brought in to simplify holiday entitlement and holiday pay calculations, especially for irregular hours and part-year workers. These rules include:

• A clearer method to calculate statutory holiday entitlement for irregular hours and part-year workers - the 12.07% accrual method.

• A clearer calculation for how much leave an irregular hour or part-year worker accrues when they take maternity, neonatal care, or other family-related leave, or are off sick.

• Defining what is considered ‘normal remuneration’ in relation to the first 4 weeks of statutory annual leave (applying to regular workers only, with ‘total pay’ applying to irregular workers).

• Rolled-up holiday pay as an alternative method to calculate holiday pay for irregular hours workers and part-year workers.

We have set out how these apply to each section below. It is recommended that employers communicate these policies directly with employees and ensure that all employment contracts and/or employee handbooks are updated.

What are possible reforms looking ahead to the Employment Rights Bill (2025)?

While the regulations above are currently in force, the government has been progressing with the Employment Rights Bill throughout 2025. A key proposal is the abolition of exploitative zero-hours contracts in favour of guaranteed hours.

While this does not yet change the calculation of holiday pay, it may eventually reduce the number of staff classified as ‘irregular hours’ workers. Employers should therefore keep a close eye on this legislation as it develops.

How is holiday entitlement calculated? 

At a basic level, calculating holiday entitlement is straightforward - you simply multiply the number of hours or days an employee works on average each week by 5.6 (as a minimum).

However, complications arise when dealing with staff on irregular hours or who have been off work.

You can use this handy holiday entitlement slide to determine how many days of entitlement your employee would get:

How do we calculate holiday entitlement for irregular hours & part-year workers?

The standard accrual method for irregular hour workers and part-year workers is calculated as 12.07% of actual hours worked in a pay period.

For example, if an irregular hours worker worked 68 hours in a particular month, you would calculate 12.07% of 68 to work out the amount of statutory leave accrued. Many teams use a holiday entitlement calculator to prevent errors here.

It is worth noting that this 12.07% figure is based on the statutory minimum of 5.6 weeks, but employers can offer their employees more than this statutory minimum should they wish. In this case, a corresponding higher percentage should be used, in order to treat all employees in a fair and similar way.

The calculation of hours accrued should be rounded down to the nearest hour if the difference is less than 30 minutes, but up if 30 minutes or more.

Accrual during absences (maternity, sick leave)

In the case of an irregular hours worker taking maternity, neonatal care, family-related (such as Paternity or Carer's Leave), or sick leave, the calculation method uses a 52-week relevant period. Employers look back to work out an average of hours worked across that period. This informs them what period of leave is deemed to have accrued during the period of absence.

Accrual during Neonatal Care Leave

The Neonatal Care (Leave and Pay) Act, effective from April 2025, introduced a statutory right to leave for parents of babies requiring neonatal care. Employees on this leave accrue holiday entitlement in exactly the same way they do during maternity or adoption leave.

The relevant period should include the day before the worker starts their leave, going back 52 weeks. If the worker has not worked for you for 52 weeks, this relevant period is shortened to the number of weeks the worker has effectively worked for you.

What is important to remember in the definition of the relevant period?

Note that, when looking back at the last 52 weeks, if the employee hasn’t worked in a particular week, that week should still be included in your calculations. For example, if a worker joined your company on 1st January, and they didn’t work the week commencing 1st February, that week would still be included in the 52 weeks. This effectively reduces the employee’s average hours worked.

Summary of accrual methods for irregular hours & part-year workers:

What are some common holiday entitlement scenarios?

Holiday entitlement will look different depending on the number of hours or days an employee works during the week. Let’s look at some common examples of this.

Full-time workers

Full-time employees working five days a week will get the standard UK holiday entitlement of 5.6 weeks of annual leave every year. In other words, they have 28 days (5 days x 5.6 weeks) that can be taken as paid leave, at a minimum.

As noted earlier, this is the maximum statutory entitlement available, so those working more days or longer hours in a week won’t automatically have a right to additional paid holiday.

Part-time workers

Now let’s see about holiday entitlement for part-time workers. If an employee is on a part-time contract, then they must receive 5.6 weeks of paid holiday but on a pro-rata basis.

This means part-time workers only get a portion of the full entitlement, adjusted for the number of days they work each week. So, if a worker is on a two-day-a-week contract, they’ll get 11.2 days of annual leave (2 days x 5.6 weeks).

How do we calculate holiday pay?

In calculating holiday pay for regular workers, the components which must be included when calculating the ‘normal’ rate of pay for the first 4 weeks of statutory leave include:

• Payments, including commission payments, intrinsically linked to the performance of tasks which a worker is contractually obliged to carry out.

• Payments relating to professional or personal status relating to length of service, seniority or professional qualifications.

• Other payments, such as overtime payments, which have been regularly paid to a worker in the 52 weeks preceding the calculation date.

For the remaining 1.6 weeks of statutory leave, the basic rate of pay is used to calculate holiday pay.

However, employers can now choose to use the rolled-up holiday pay method to calculate holiday pay for irregular hours or part-year workers, whereby the entire amount of leave will be paid at the ‘total’ rate of pay (different to the ‘normal pay’ used for regular workers).

Can leave be carried over?

Most businesses will choose to run their holiday year from 1st January to 31st December to align with the calendar year (though some companies may choose to align it with the financial or tax year), and any holiday allowance (e.g. 28 days) will reset immediately after this.

For example, let’s say your holiday year aligns with the calendar year, and you’ve got an employee with five days of holiday left by 31st December. That means their leave will reset on January 1st, so they’ll have 28 days available then.

Some businesses might choose to allow employees to carry over leave. In this case, the employee in the example above would have 33 days (28 days + 5 days carried over) available from 1st January. It’s important to note, however, that employees aren’t automatically entitled to carry-over (their working contract must state whether they are or not).

The exception to this is if the employee takes a long period of leave such as Maternity, Adoption, Neonatal Care (from April 2025), or long-term sick leave. In the first three instances, the employee is entitled to carry over 5.6 weeks of annual leave, while, for long-term sick leave, it’s four weeks.

Calculating annual leave for your staff

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Does holiday allowance start from a new hire’s first day?

Usually, an employee’s leave allowance will start from their first month of employment. So if an employee joins your company mid-year, their holiday allowance should be pro-rated based on this (e.g. if a full-time employee arrives six months in, they should only be entitled to 14 days holiday, not 28 days).

Are bank holidays included in holiday entitlement?

This is a good question! The short answer is it’s up to you as an employer.

Some businesses have workers take bank holidays off as part of their annual leave entitlement. Others might pay for them in addition to their annual leave entitlement. The choice is up to your company.

What happens to holiday entitlement when an employee leaves?

When an employee decides to leave your company, their full statutory entitlement will need to be pro-rated. That includes both statutory leave days and bank holidays. That being said, you can still split entitlement between statutory and bank holiday days.

How much notice does an employee need to give to take leave?

Guidance on the UK Gov website suggests that employees should give their employer twice as much notice as the amount of time they intend to take off. So, if one of your employees wants to take one day off for a holiday, they should give you at least two days’ notice right before this.

But this guidance is standard, and could vary depending on what their work contract states (which will override the government’s guidance in this case).

Why do you need a holiday pay policy?

A holiday pay policy pretty much does what it says on the tin - it’s a way for your organisation to manage how and when your employees take their holiday. Having a clear policy in place will not only clear up any confusion, but will also reduce employee queries about their holidays.

In addition, it can help lower the risk of holiday entitlement misuse and ensure legal compliance. Add in a solid system to help you manage your company’s holiday entitlement (like good payroll software), and you’ll be off to the races.

To begin with, you’ll want to clarify a few things, like whether your organisation observes bank holidays. You’ll also want to explain how much notice employees should give before planning and booking their holiday. Again, as discussed before, you can vary this from standard government guidance as long as you make it clear in your employment contracts. You might even want to set up a holiday purchase scheme as well.

Furthermore, you might want to outline when employees can or can’t take holidays. For instance, you can require employees to take time off during bank holidays like Christmas or New Year if you choose to close your business on these days.

In a similar way, you can restrict staff from taking days off during busy periods. Still, you don’t want to get in the way of workers taking their leave full stop - remember, workers have a right to holiday here in the UK.

In fact, as an employer, you should do everything to encourage employees to take their annual leave. If you don’t, you’ll look bad in the eyes of UK law and your staff. If you ask employees not to take leave on specific days, you must give them a chance to take that leave at another time.

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