The calculation methods for holiday pay and entitlement differ depending on whether you're a regular or irregular worker.
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.
If you're an irregular worker, this Help Centre article explains how your holiday pay and entitlement are calculated.
Otherwise, if you're a regular worker, this Help Centre article explains your holiday entitlement, while this Help Centre article explains your holiday pay.
How many holidays you have to take
If you're on a zero-hour contract or you work days, hours, or weeks irregularly, you're an 'irregular worker'.
You're still entitled to 5.6 weeks of annual leave, but it's complicated to calculate if you don't have a fixed working pattern. Your employer will usually use 12.07% as a rate to calculate your annual leave entitlement, or pay, instead of 5.6 weeks. They'll use a higher rate if they offer additional contractual annual leave.
Over the last few years, case law told us that part of the holiday and entitlement guidance for employers was unlawful, which left the correct calculations unclear.
Legislation is now available when your annual leave year starts on or after 1 April 2024. So if your holiday year runs from January to December, the legislation will be lawful from January 2025.
Note: Unfortunately, this doesn't clear up guidance for calculating your holiday pay and entitlement before the legislation takes effect. In the meantime, you should speak with your employer, who can work with an employment lawyer to understand your statutory entitlement based on your circumstances.
The new legislation means you'll either accrue a bank of annual leave or you'll be paid holiday pay each pay period. This is also known as 'rolled-up holiday pay' and used to be unlawful.
There's more information about the two methods below:
Tip: If your contract has an annual leave entitlement that's already more favourable, your entitlement might not change.
For example, you work a maximum of 30 hours a week, but you often work less. Your employer gives you 6 weeks of paid annual leave based on 30 hours a week. It's a much higher entitlement than you'd receive using the new methods.
Accruing annual leave entitlement
In this method, you'll accrue an annual leave entitlement as a percentage, usually 12.07%, of the hours you work each pay period. You can take your annual leave entitlement just as a regular worker would.
This is usually quite simple, but if you take statutory sick or parental leave during the pay period, it becomes more complicated. In this case, it's calculated using an average of your hours worked over the previous 52 weeks, including any weeks where you didn't work.
When you take your accrued annual leave, all of your annual leave is paid at your 'normal rate'. This differs from a regular worker, who only needs to be paid the 'normal rate' for a proportion of their annual leave entitlement. The 'normal rate' is explained in our Help Centre article about understanding holiday pay, in the Normal rate section.
You should see your annual leave entitlement accruing each pay period on your payslip.
Accruing holiday pay
In this method, you're paid holiday pay in each pay period. It's calculated as a percentage, usually 12.07%, of the total pay you earn during the pay period. You must still take your annual leave entitlement, but you won't be paid when you do.
This is usually quite simple, but if you take statutory sick or parental leave during the pay period, it becomes more complicated. In this case, it's calculated as an average of your pay over the previous 52 weeks, excluding weeks where you didn't work.
Because the calculation is based on your total pay, you're paid at least the 'normal rate'. This differs from a regular worker, who only needs to be paid the 'normal rate' for a proportion of their annual leave entitlement. The 'normal rate' is explained in our Help Centre article about understanding holiday pay, in the Normal rate section.
You should see your holiday pay clearly on your payslip.
When you should be paid holiday pay
Annual leave is paid at different times depending on whether you're accruing an annual leave entitlement or holiday pay.
If you're accruing an annual leave entitlement, you'll only receive holiday pay when you take annual leave, or when you leave the company.
If you're accruing holiday pay, you're paid it at the end of each pay period, not when you take annual leave.