[Updated 10/01/25]

Annual Holidays – Statutory Entitlement re Leave & Pay

In order to simplify payments for holidays, the law now permits employers to pay staff 12.07% of their ‘pay’ to cover holidays. This should be paid in equal instalments across the year e.g. weekly or monthly and must be shown as an item on payslips. That sounds simpler but you need to note the points below to avoid falling foul of the legal right especially individuals whose pay may vary or be contracted in certain ways.

The revised, permitted calculation of holiday pay takes effect for holiday years starting from 1st April 2024 or from a later holiday year start date.

This right applies to casual, part-time, agency workers and irregular hours workers who are not in genuine self-employment. There some differences though as mentioned below.

TIP – If you need staff to work on some or all public/bank holidays, you should state that in their employment terms and ensure that they still have an entitlement to 28 days of holiday.

A Full Time Worker

The minimum entitlement is 5.6 weeks paid holidays (that is 28 days paid holidays) for individuals working full time five days a week. Individuals working more than 5 days per week do not accrue a higher entitlement to statutory holiday.

An employer may decide that the 28 days is inclusive of public/bank holidays but an employer is free to decide that public/bank holidays are in addition to the 5.6 weeks statutory minimum entitlement.

The method of calculating holiday pay by adding 12.07% to the pay of full time workers is permitted as they should continue to be paid as nomal when on holiday. In the past such method of calculation was disapproved of.

B Part Time Worker

Part time staff should receive a pro rata holiday entitlement to 28 days and payment when on holiday as normal. That is because they will be deemed to be workers with regular hours even though part-time.

C Part Year or Irregular or Variable Hours or Zero Hours Worker

This grouping is because the individual’s hours are not regular across the year. The right to a pro rata holiday entitlement and pay of 5.6 weeks is strict and applies to such workers on a pro rata basis. As the hours of such individuals vary, holiday pay may be paid as an additional sum at the same time as paying other basic pay using an allowance of 12.07%.

If holidays are owed to the individual when employment is terminated by either the employee or the employer, it is permissible to pay for any untaken holiday leave.

Calculation of Holiday Pay Entitlement for the C Group of Workers

Holiday entitlement and pay should be based on the average hours worked over a period of 52 weeks immediately before the leave period concerned. The 52 weeks should include weeks in which no work was performed but exclude any weeks of sickness or any statutory leave such as parental leave. Multiply the total hours worked by 12.07% to give the worker’s total annual statutory holiday entitlement in hours.

If an individual, before the first day of the holiday period concerned, has not worked 52 weeks then different methods of caclulation are required to ensure that fair payment is made.

• individual on variable hours has worked less than 52 weeks, then the calculation will be based usually on the average earnings in the period of weeks concerned;
• for an individual on variable pay who has worked over 52 weeks, usually the calculation will be on the average earnings in the 52 weeks reference period up to the date of the intended holiday.

Beware – for individuals who are not entitled to be paid each week, although ’employed’ 52 weeks or more their paid holiday entitlement varies according to whether an individual has been paid for more or less than 52 weeks in the reference period.

The employer is required to examine up to the last 104 weeks of hours/pay to determine what is the average earnings payments in the reference period

i) If the employee has worked less than 52 weeks in the 104 week reference period, he/she should be paid the average earnngs for the worked weeks.

ii) If the employee has worked 52 weeks or more in the 104 week reference period, he/she should be paid the average earnngs for the most recent 52 weeks worked before the first date of the holiday in question.

There is no requirement to go back more than 104 weeks as a reference period.

For more detail of calculation methods see the Government guidance.

Special Background Note #

The original legislation on holidays was passed as a heath and safety measure to provide pay and time off work for the purpose of recuperation/rest. The principle being that if payment is made close to the holiday, an individual is more likely to take the ‘holiday’. For that reason, an employer could not (and still can not) pay in lieu of an individual taking holidays. The only exception is on termination of employment.

The first 4 weeks i.e. 20 days are an entitlement under EU law; the additional 8 days (1.6 weeks) were added by UK law. This can lead to differences in practice. For example, the first 20 days attract normal pay and the remaining 8 days attract basic pay. There is no right to carry over holidays beyond the basic 20 days but an employer can agree a clause to allow individuals to carry over the additional 1.6 weeks (i.e. 8 days).

For ease of administration, many employers treat the 28 days as attracting normal pay.