Holiday pay explained: normal pay, the 52-week average and rolled-up holiday pay

The rule in one line

Workers get a week's pay for each week of statutory leave they take. The difficulty is working out what "a week's pay" is when pay varies.

Working out a week's pay

GOV.UK sets out the method by working pattern:

• Regular hours and fixed pay: their normal pay for a week.
• Regular shifts: the average number of fixed weekly hours over the previous 52 weeks, at their average hourly rate.
• Irregular hours or part-year work: their average weekly pay over the previous 52 weeks, counting only weeks in which they were paid.

For monthly-paid workers, divide each month's pay by the hours worked to get an hourly rate, multiply by weekly hours, and average over 52 weeks. If someone has worked for you for less than 52 weeks, use the weeks they have worked.

Normal pay versus basic pay

For regular-hours workers, the 5.6 weeks of statutory leave splits into two parts:

• At least 4 weeks must be paid at normal pay.
• The remaining 1.6 weeks can be paid at basic pay.

Irregular-hours and part-year workers get all their leave at normal pay.

Normal pay includes commission, regular overtime, and payments for length of service or qualifications. It usually excludes one-off bonuses. If your sales staff earn commission or your kitchen staff work regular overtime, paying only basic salary during holiday underpays them for the 4 weeks.

Rolled-up holiday pay

Rolled-up holiday pay means adding an amount to every payslip instead of paying when leave is taken. It is not allowed for regular-hours workers. For irregular-hours and part-year workers it is allowed for leave years starting after 31 March 2024, as long as it is shown separately on the payslip. These workers build up holiday at 12.07% of hours worked, so rolled-up pay is typically 12.07% of their pay for the period.

They should still take time off. Rolled-up pay pays for the leave; it does not replace it.

When someone leaves

You must pay for statutory holiday built up but not taken, including when someone is dismissed for gross misconduct. Payment in lieu is only allowed on leaving. If they took more than they built up, you can only recover the difference from final pay if they agreed to that in writing beforehand.

Records: 6 years

From 6 April 2026, GOV.UK says employers must keep detailed holiday records for at least 6 years. Keep entitlement, leave taken and the holiday pay calculation for each worker.

Common mistakes

• Paying basic salary only, when the worker regularly earns overtime or commission.
• Using the wrong reference period, or including weeks with no pay for irregular-hours workers.
• Using rolled-up holiday pay for regular-hours staff.
• Forgetting holiday pay in final pay when someone leaves.
• Not keeping the calculation, so you cannot show how a figure was reached.

Sources

• GOV.UK: Holiday pay
• GOV.UK: Calculate leave entitlement
• GOV.UK: Taking holiday before leaving a job