Holiday Pay

What Is Holiday Pay? 

Under the Working Time Regulations 1998, almost all workers in the UK are legally entitled to 5.6 weeks of paid holiday per year. This includes: 

• Full-time staff (28 days including bank holidays) 
• Part-time or irregular staff – entitlement is calculated proportionately 

Holiday pay must be paid at the normal rate of pay the worker would have earned had they been at work. 

1. Rolling Up Holiday Pay (Now Unlawful in Most Cases) 

Rolling up means paying a slightly higher hourly rate to include holiday pay instead of paying it when the holiday is actually taken. 

Important: Rolling up holiday pay is not allowed under UK law (confirmed by the ECJ and UK tribunals), except in specific and exceptional contract arrangements. 

Where used, payslips must clearly show the holiday pay element separately. We strongly advise clients to move away from this practice to avoid potential liabilities. 

2. Pro Rata Holiday Pay 

This applies when: 

• An employee starts or leaves part-way through the year 
• A part-time employee works fewer days than a full-time counterpart 
• A worker is on a fixed-term or temporary contract 

The 5.6 weeks’ entitlement is adjusted proportionately (pro rata). For example:
– A part-timer working 3 days/week is entitled to 3/5 of 28 days = 16.8 days
– A new starter joining on 1 July would receive approximately 14 days if the leave year runs to 31 December

We handle pro rata holiday entitlement automatically, including adjustments on termination. 

3. Accruing Holiday – Especially for Variable Hours or Zero-Hours Contracts 

Since 1 January 2024, the UK allows employers to use a 12.07% accrual method for casual workers, calculated as: 

Holiday pay = 12.07% of hours worked 

This method simplifies accrual for:
– Zero-hours staff
– Irregular hours staff
– Term-time or seasonal workers 

Note: From 1 April 2024, the new Employment Rights Regulations permit rolled-up holiday pay for irregular hours workers and part-year workers, but with conditions: 

• Holiday pay must be shown separately on payslips 
• Rate must be at least 12.07% of pay 
• Worker must agree in writing 

EPS will ensure compliance if you engage staff under these conditions.