Holiday Pay

Published on Friday 13 April 2018
  • All workers are entitled to 5.6 weeks’ statutory paid holiday. This can include bank and public holidays.
  • Part-time workers should receive the same entitlement as their full-time colleagues, but on a pro rata basis.
  • Workers are entitled to receive a week’s pay for each week’s leave. Overtime should be included if it is both compulsory and guaranteed.
  • Unlike the basic statutory holiday (4 weeks), additional statutory holiday (the additional 1.6 weeks) may be carried forward to the next year.
  • A worker who becomes sick during their holiday can ask to convert the holiday to sick leave and then take the holiday at a later date.
  • Employees on maternity, adoption, paternity or shared parental leave accrue their full contractual holiday entitlement throughout the entire period of their leave.

What does an employer need to include in their holiday pay policy?

An employer should clearly set out how holiday leave operates, to include:

  • Are bank/public holidays included in, or in addition to, the stated annual leave entitlement?
  • How is holiday pay calculated?
  • What arrangements are in place to calculate pro-rata holiday entitlement for part-time workers?
  • What is the holiday year?
  • How is holiday entitlement calculated for employees starting or leaving during the holiday year?

There should also be a clause in the contract to allow any overpaid holiday to be deducted from the final salary payment for a leaver.

How is holiday pay calculated?

Workers are entitled to receive a week’s pay for each week’s leave.

  • For a worker with regular working hours, a week’s pay is straightforward, i.e. what that worker would earn for a normal working week.*
  • For workers with no normal working hours, then a week’s pay is the average pay received over the preceding 12 weeks. Any week for which no pay was due should be replaced by the last previous week for which pay was due.
  • For casual workers who work very irregular hours, it is possible to calculate holiday entitlement that accrues as hours are worked. The holiday entitlement of 5.6 weeks is equivalent to 12.07% of hours worked over a year.

* Recent tribunals have indicated that holiday payments due to workers who receive regular amounts of overtime, commission or other payments should reflect the pay that the employee or worker normally receives. This includes “non-guaranteed” overtime and other allowances that are “intrinsically linked to the performance of the tasks”.   This only applies to the first four weeks of statutory leave under the Working Time Directive, not the additional 1.6 weeks’ holiday, nor any additional contractual holiday.

For more detailed guidance in respect of holiday entitlement and pay, please refer to www.gov.uk