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Holiday Leave and Pay: All you need to know

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Having time off work is essential for everyone! It is what keeps us happy and healthy. Allowing employees, the necessary time for rest and relaxation keeps them motivated and helps reduce burnout.

In the UK, employment law states that all workers are entitled to a minimum of 5.6 weeks of paid annual leave a year this is pro rata for part time staff and all workers should be paid their normal pay during this time. 

Entitlement for paid holiday starts to build up (accrue) from the first day of employment and this is calculated based on the number of weeks they will work in the remainder of the holiday year – by way of example:

If a 5 day worker joins your business 20 weeks before the end of the holiday year the calculation would be 28 (entitlement for a 5 day worker in a full year) divided by 52 (number of weeks in a year) x 20 (weeks to be worked during the remainder of the current holiday year) = 10.77 days. This would be rounded up to the nearest day meaning the employee would be entitled to 11 days holiday in their first year of employment.

We get lots of questions about holiday leave and pay so we have put together this comprehensive guide to answer all those questions.

What are employees’ rights to holiday? 

The Working Time Regulations state that workers have the right to a minimum of 5.6 weeks paid annual leave each year which is equivalent to 28 days per annum (pro rata for those who work less than 5 days per week),. This entitlement includes public and bank holidays and begins on the first day of employment. The holiday year is fixed by an agreement usually an employment contract or collective agreement – if it is not documented here it runs from the start date until the anniversary of that date the following year.

How to calculate holiday pay?

Holiday pay must be calculated on the basis of the employee’s normal pay. When employees take holiday, they should receive the same amount of pay as they would if they were working.

If you have a fixed working pattern: if you work for example 37 hours every week, you will receive £400 a week in wages, when you take a week’s holiday you must then get paid £400.

If you do not work fixed hours, your pay is based on the average pay you have received over the previous 52 weeks.

You must remember that there are different elements of pay that make up “normal pay” that should be included in the calculation of holiday pay.  Such as overtime pay, commission payments, bonuses, shift allowances and premiums etc.

Therefore, any pay that is “normally received” such as overtime, shift premiums etc. should be included in holiday pay.

How to calculate accrued holiday?

When you first begin your employment, if you have not built up enough holiday days to take any holiday a lot of employers agree to give holiday as ‘accrued’.

The pay for this should be an amount that fairly represents your pay for the agreed time off.

The recommendations to work this out is to:

  1. Consider the amount you’re paid for the job
  2. Consider the pay you have already received
  3. What other people in a similar position are paid for their holiday.

To work out how much holiday an employee is entitled to, it is one-twelfth of their leave for each month worked or 1/52nd for each week worked.

What is the notification employees need to give for holidays?

When an employee wishes to take a holiday, the government website states that the general notice period for booking time off is at least twice the amount of leave a worker wants to take, plus one day. Often the holiday notice period is included in the contract of employment or company handbook.

Employers can refuse to allow holiday at a particular time however they cannot refuse to let an employee take holiday completely. 

Key points for employers

Employment law states that employees are entitled to paid holiday and as an employer it is your responsibility to make sure they receive the right entitlement.

We know this can be confusing and cause headaches for employers, but a key point to remember is that annual leave must be granted in line with your employees contracts and it is crucial you allow this time off to maintain work productivity and wellbeing levels.

Therefore, we recommend that employers put clear company guidelines in place which everyone within the company understands – such as a ‘first come first serve’ basis for annual leave requests, the necessity for a shared calendar that all staff can view to see when other members of the team will be off and how tasks/projects can be managed during those times.

The rules surrounding holiday leave and pay are quite complex. HR:4UK can help you to calculate holiday entitlements and pay to ensure that you meet all your legal obligations.

For further help and advice, speak to one of our advisors by calling 01455 444222 or complete our online enquiry click here and an advisor will contact you shortly.

Background links:

Holiday entitlement: Holiday pay – GOV.UK (www.gov.uk)

The ultimate guide to holiday leave and pay in the UK (businessadvice.co.uk)

Holiday leave and pay: the law (smallbusiness.co.uk)

How holidays affect final pay: Final pay when someone leaves a job – Acas

Calculating holiday pay: Checking holiday entitlement – Acas



Angela Clay

A qualified employment law solicitor and our managing director, Angela has unparalleled legal expertise and decades of experience and knowledge to draw from. She’s a passionate speaker and writer that loves to keep employers updated with upcoming changes to legislation, and is a regular guest speaker on BBC Leicester Radio.