The calculation methods for holiday pay differ depending on whether the worker is regular or irregular.
Regular worker refers to contract types such as full-time, part-time, or fixed hours.
Irregular worker refers to contract types such as zero-hour and part-term.
This Help Centre article explains holiday pay calculations for regular workers.
For more information about calculating holiday entitlement for regular workers, please refer to our Help Centre article.
For more information about calculating holiday pay and entitlements for irregular workers, please refer to our Help Centre article.
Tip: There's an employee version of this same Help Centre article that you can send to them.
Calculating holiday pay
Employees and most workers are entitled to a statutory minimum of 5.6 weeks of annual leave per year. This is regardless of the number of hours or weeks they work in a week. The entitlement is simply the weekly days or hours, multiplied by 5.6. Employers might offer an increased annual leave entitlement, also known as contractual leave.
The statutory minimum of 5.6 weeks, for the purposes of holiday pay, is split into two blocks, each with a minimum pay rate:
1.6 weeks (8 days for a 5-day worker) paid at a basic rate.
4 weeks (20 days for a 5-day worker) paid at a normal rate.
Any additional contractual entitlements are paid at the worker's contractual rate, with a minimum rate of the national minimum wage.
Tip: These are the minimum rates the worker should receive when taking annual leave. Employers may choose to pay a higher rate.
Basic rate
The basic rate can be used for 1.6 of the 5.6-week entitlement.
As an employer, you can choose when the 1.6 weeks are used, but you must agree with the worker first. You might choose to apply the basic rate to all bank holidays or to the first 1.6 weeks taken within the annual leave year.
This annual leave entitlement is paid at the worker's basic rate as a minimum, i.e., their contractual hourly or daily rate of pay.
Normal rate
The normal rate must be paid for at least 4 weeks of the 5.6-week entitlement.
The rate is based on the pay they would normally receive had they been working. This means that, in addition to the worker's daily or hourly rate, any regular payments must be taken into account, such as:
Payments intrinsically linked to performance of work: e.g. allowances, shift bonuses, etc
Payments relating to professional or personal status or qualification: e.g., payments for increased responsibilities or length of service.
Regular payments in the preceding 52 weeks: this isn't limited to overtime.
The holiday rates should be displayed clearly on their payslip.
When looking at regular payments in the preceding 52 weeks, we refer to this as a '52-week relevant period' or a 'pay reference period'. For more information about this, please refer to our Help Centre article.
When to pay holiday pay
For regular workers, you must only pay holiday pay in the following two circumstances:
When they take annual leave.
When they leave employment.