Holiday pay made simple

Whether you’re a business owner or an employee, this post will answer many of the FAQs about holiday pay, helping you to work out holiday entitlement with ease.

How to work out holiday entitlement

Almost all people classed as workers are legally entitled to holiday.

For a worker who works a 5-day week, their holiday entitlement (also known as ‘statutory leave’ or ‘annual leave’) must be at least 28 days paid annual leave a year. This equates to 5.6 weeks of holiday.

An employer can include bank holidays as part of a worker’s statutory annual leave.

A ‘worker’ includes those on zero-hours contracts, those with irregular hours, and agency workers too. You can find out more about employment status on the gov.uk site.

How to calculate holiday pay

For a full-time employee, annual leave entitlement is a straightforward 5.6 weeks per year (if working five days a week).

An employer can choose to offer more leave than the legal minimum. Check your contract of employment to be sure what you’re entitled to.

Calculating part-time holiday

For part-time employees, it’s slightly more involved, as it’ll be a pro-rata holiday entitlement.

This means that the holiday entitlement will depend on how many hours the worker is contracted for, in proportion to the holiday entitlement of a full-time worker.

For example, if a part-time worker is contracted to work 3 days per week, they’re entitled to at least 16.8 days leave each year. This is calculated as follows:

• Full-time worker (working a 5-day week) = 5.6 weeks paid leave per year (the legal minimum)
• Part-time worker (in this example working a 3-day week) = 3 x 5.6 = 16.8 days per year

What about holiday pay for casual workers?

If you, or your employee, work casual or irregular hours, you can calculate the entitlement using the pro-rata method, in proportion to the hours worked in an average week.

The gov.uk holiday entitlement calculator is a really useful tool. You can calculate how much annual leave a person is entitled to – whether you need to pro-rata the annual leave based on days or hours worked in an average week.

Calculating bank holiday payments

Bank holidays or public holidays don’t have to be given as paid leave. An employer can opt to include bank holidays as part of a worker’s statutory annual leave entitlement, so check your employment contract.

What is required in a small business employment contract?

How to calculate holiday overtime pay

The pay you receive while on annual leave should be the same as what you’d normally earn while at work, including any overtime, commission, or bonus.

Therefore, if you regularly do overtime, this should be included in the calculation of your holiday pay.

To calculate holiday overtime pay, look at your average weekly pay over the past 52 weeks. This figure should include any overtime, commission, or bonuses you received during that time period. Divide this total figure by 52 to get your average weekly pay.

An employer must include overtime, commission, or bonuses for the first 4 weeks of annual leave pay, the remaining holiday entitlement will be paid at your basic rate.

Do the self-employed get holiday pay?

Unfortunately, the self-employed are not entitled to statutory holiday pay.

If you’re a contractor, you may be entitled to paid holiday if you work a fixed number of hours with fixed pay, but this depends on the terms of your employment contract.

What is IR35 and does it apply to you?

What about getting paid instead of taking holidays?

The only time an employee can get paid instead of taking holidays is when the contract is terminated. This applies even if the employee is dismissed for gross misconduct.

What if you’re sick on annual leave?

If you’re sick just before, or during, annual leave, you can take the time as ‘sick leave’ instead. If an employee is eligible for sick leave, an employer cannot force the employee to keep the time away from work as annual leave.

How do you calculate holiday pay upon leaving a job?

Holiday entitlement is spread across the year, with a worker getting one-twelfth of their annual leave each month.

If you leave your job after 3 months, you will have accrued 3 months’ worth of holiday entitlement.

As an example, for an employee working a 5-day week, the annual leave entitlement is 28 days a year.

If that employee has completed 3 months of employment, they will have accrued 7 days of their annual leave entitlement.

28 days leave / 12 months = 2.33333 days annual leave per month.

Multiply that monthly entitlement by 3 months (2.33333 x 3) = 7 days entitlement.

Redundancy holiday pay

If made redundant from a job, you’ll be paid any holiday entitlement you have left when you leave the company.

Use the example above to calculate the amount of redundancy holiday pay you’ll be paid.

Do you get holiday pay on maternity leave?

Yes, as an employee, you will still build up holiday pay while on maternity, paternity, or adoption leave.

Maternity and paternity leave for tradespeople

Are you entitled to take pre-booked holiday during a notice period?

A worker may be able to take pre-booked holiday during their notice period. Check your employment contract to be on the safe side.

FAQs

How do you calculate holiday pay?

A full-time employee who works 5 days a week will receive 28 days (or 5.6 weeks per year) of annual leave entitlement. For a part-time employee, it’ll be pro-rata depending on how many hours they are contracted for. As an example, if they’re contracted to work 3 days a week, they’ll be entitled to at least 16.8 days of annual leave per year (3 x 5.6).

How do you calculate hourly holiday pay?

For workers who do irregular hours, employers often take the number of hours worked and multiply it by 12.07% to calculate hourly holiday pay.

Is holiday pay normal pay?

A worker should get the same pay on annual leave as they do while at work.

What is the law on holiday pay and overtime?

You should receive the same pay while on annual leave as you do while at work, including any overtime, commission, or bonus. To calculate holiday overtime pay, look at your average weekly pay over the past 52 weeks. This figure should include any overtime, commission, or bonuses you received during that time period. Divide this total figure by 52 to get your average weekly pay. An employer must include overtime, commission, or bonuses for the first 4 weeks of holiday pay, the remaining holiday entitlement will be paid at your basic rate.

Has the law changed on holiday pay?

On 6th April 2020, the Employment Rights Regulation 2018 was amended to change the reference period for calculating holiday pay. Previously, a person’s average wage was based on 12 weeks of pay, whereas it’s now based on 52 weeks of pay.