Holiday Pay Calculation UK: Employer Guide, Formulas & 52-Week Rule (2026)

Holiday entitlement tells you how many days or hours of time off a worker has earned; holiday pay tells payroll how much money each day or week of that leave is worth. Under the Working Time Regulations 1998 (as amended in 2024), the calculation method depends on whether the worker has fixed hours and fixed pay, fixed hours with variable pay (such as regular overtime or commission), or irregular hours / part-year working.

For regular-hours workers, at least the first 4 weeks of statutory holiday (Regulation 13 leave) must be paid at the worker's 'normal remuneration', not merely their basic salary. Under Regulation 16(3ZA), normal pay includes payments intrinsically linked to the performance of tasks required under the contract, regular overtime, regular commission, and payments relating to professional or personal status (such as length of service or shift allowances). The remaining 1.6 weeks of statutory leave (Regulation 13A) can be paid at basic pay unless the contract promises normal pay across all holiday.

For irregular-hours workers (such as zero-hours and casual staff) and part-year workers (such as term-time workers paid by hours worked), all 5.6 weeks of statutory holiday are treated as a single entitlement under Regulation 15B and must be paid based on total normal remuneration.

Whenever a worker's pay varies (because of shift patterns, variable hours, regular overtime, or commission), you calculate a week's holiday pay by averaging their pay across the last 52 weeks in which they actually earned remuneration, ending with the last full week before the holiday starts.

Crucially, zero-pay weeks (weeks in which the worker performed no work and earned no pay) must be excluded rather than counted as £0.00. Instead, you skip over any zero-pay weeks and count further back, up to a maximum look-back cap of 104 calendar weeks before the holiday. Likewise, for regular-hours workers, weeks in which pay was reduced because of sickness or statutory family leave are skipped so that statutory sick pay or maternity pay does not artificially depress the worker's holiday pay average.

If a newer employee has been employed for fewer than 52 paid weeks (or fewer than 52 paid weeks exist within the 104-week look-back window), you simply average across the complete paid weeks that are available.

For leave years starting on or after 1 April 2024, Regulation 16A of the Working Time Regulations allows employers to use rolled-up holiday pay for qualifying irregular-hours and part-year workers only. Under rolled-up holiday pay, instead of waiting until the worker books holiday to pay them, you calculate 12.07% of their total normal pay in each pay period and pay it alongside their wages, clearly itemised as a separate line on the payslip. You can test both methods instantly with our free Irregular Hours 12.07% Holiday Calculator.

When any employee leaves mid-way through a leave year, you must calculate their final holiday balance under Regulation 14. Multiply their full-year entitlement by the proportion of calendar days employed in the leave year up to their final day, and subtract the leave (including paid bank holidays) already taken. If the result is positive, you must pay the untaken leave in lieu on their final payslip; if negative (overtaken holiday), you can deduct the excess from final pay only if your employment contract contains a prior written deduction clause. Use our free UK Leaver Holiday Pay Calculator to generate a ready-to-send payroll settlement statement.

Under the Employment Rights Act 2025 enforcement reforms taking effect from 6 April 2026, UK employers are legally required to keep adequate records demonstrating compliance with statutory annual leave and holiday pay rules for at least 6 years from the date the record is created.

In practice, that means keeping a clear audit trail of each employee's working pattern, leave year, holiday requests and dates taken, the reference-period weeks or rolled-up percentage used by payroll, and leaver settlement calculations. Storing leave requests in email threads or overwriting a spreadsheet each January leaves you without the six-year history required during an inspection.