Holiday pay during notice period UK: rules and final pay

Yes, while the employee is still employed. Statutory leave owed on leaving is worked out to the termination date, so a notice period that is worked, or spent on garden leave, adds to the leave earned. A long notice period can add a noticeable amount: three months is roughly a quarter of the annual entitlement.

The position changes when the contract ends early. Under a contractual payment in lieu of notice (PILON) clause the employee stops work and the contract ends straight away, so leave is calculated to that earlier date and the notice period is not added. If PILON is not in the contract, the employer cannot force the employee to accept it, so check the contract and take advice before relying on it.

Contractual holiday above the statutory 5.6 weeks follows the contract. Check whether it says how that extra leave accrues and is paid on leaving.

Usually, yes. Acas says a worker might be able to take any holiday they have accrued during their notice period, depending on whether they can give the required notice and whether the employer agrees. The normal booking rules still apply: unless the contract says otherwise, the worker gives notice at least twice as long as the leave they want.

An employer can refuse or cancel a request, but it must give at least as much notice as the amount of leave requested. Refusing a five-day request, for example, needs at least five days' warning before the leave was due to start. Refusing can make sense where a handover matters, but the untaken leave then has to be paid in the final pay.

Bank holidays that fall in the notice period are treated in the usual way. Bank holidays do not have to be given as paid leave, but if the contract counts them as part of the annual allowance, they are deducted from the balance like any other day off.

Yes. An employer can tell staff to take leave on particular dates, as long as it gives notice at least twice as long as the leave it wants them to take, and tells them before that notice period begins. A contract can set different notice terms, and where it does, the contract applies. Put the instruction in writing with the exact dates.

In a short notice period it may not be possible to give enough notice to use all the remaining balance. Whatever cannot be scheduled lawfully is paid in lieu at the end. Placing someone on garden leave does not by itself use up their holiday. Unless the contract allows holiday to be taken during garden leave, give notice under the normal rules if you want leave taken in that time.

Notice pay covers the notice period. Holiday pay in the final payment covers leave that was earned but not taken. One cannot be used to cancel out the other, and an employer cannot simply label part of the notice pay as holiday pay. If holiday is actually taken during notice, the days off reduce the balance and the employee is paid holiday pay for them instead of wages.

Being off during notice can affect notice pay. Acas explains that where an employer gives notice and the contractual notice is the same as, or less than one week longer than, the statutory minimum, the employee is entitled to full normal pay while off on holiday or sick. Where the contractual notice is at least a week longer, they get only the pay that applies to the reason they are off. Different rules apply when the employee resigns, so check the Acas guidance for that case.

The statutory minimum notice an employer must give is one week for continuous employment of one month to under two years, one week for each complete year from two to under twelve years, and twelve weeks after twelve years. An employee with a month or more of service must give at least one week, unless the contract says more.

For statutory leave, the Working Time Regulations use a formula: (A x B) - C. A is the annual statutory entitlement, B is the proportion of the leave year that has passed by the termination date, and C is the leave already taken in that leave year. A relevant agreement, such as the contract, can set its own method, so check that first.

Use the termination date, not the date notice was given. Add any valid carry-over from the previous year. A worker who could not take leave because of sickness can carry over up to 20 days if they work regular hours all year, or up to 28 days for irregular-hours or part-year workers, and leave missed because of family-related leave can also be carried forward.

Irregular-hours and part-year workers build up leave at 12.07% of the hours worked in each pay period, so total those accruals to the leaving date and subtract leave taken. Check that a displayed balance is accrued leave and not the full-year allowance, because paying the full year on a mid-year departure overstates the payment.

A week's holiday pay depends on how the person works and is paid. A regular-hours worker on fixed pay gets their normal weekly pay. Where hours or pay vary, take the average over the last 52 weeks in which pay was earned, counting back up to 104 weeks to find them.

For regular-hours workers, at least 4 weeks of the statutory leave must be paid at the normal rate, which includes commission and regular overtime but usually not bonuses. The remaining 1.6 weeks can be paid at the basic rate. For irregular-hours and part-year workers, all statutory leave is paid at the normal rate.

Do not assume dividing salary by 260 is always right. It can be a reasonable contractual method for a fixed five-day week, but unequal shifts and variable earnings need the reference-period approach.

When leave taken is more than leave earned at the termination date, the employer can recover the excess from final pay only if this was agreed beforehand in writing, for example in a contract clause. The Working Time Regulations allow a relevant agreement to require the worker to compensate the employer, and the Employment Rights Act only permits deductions from wages that are authorised by statute, the contract, or the worker's prior written agreement.

Without that agreement, a deduction risks an unlawful deductions claim. Show the excess days and the money as a separate line on the final payslip so the employee can check it.

Employers must pay untaken statutory leave even when the worker is dismissed for gross misconduct, although the employee is not entitled to a notice period in that case. Holiday is calculated to the date of dismissal.

If an employee leaves without working their notice, the employer usually only pays for the time worked, but accrued untaken statutory holiday up to the last day must still be paid. Holiday pay cannot be withheld as a penalty for not giving notice. Any deduction from final pay must be authorised by the contract or agreed in writing beforehand.

Redundancy does not change the holiday rules. Leave builds up through consultation and any worked or garden-leave notice, and redundancy pay and holiday pay are separate amounts. The employer can still ask the employee to take holiday before leaving, using the twice-the-leave notice rule.

Holiday pay and payments in lieu of notice are taxed in full like wages, with National Insurance. They are not part of the first £30,000 of termination payments that is usually tax-free, which applies to items such as statutory redundancy pay and enhanced severance. Keep holiday pay, notice pay, redundancy pay and any deduction on separate lines.

From 6 April 2026, employers must keep detailed records of annual leave and holiday pay, and keep them for at least 6 years from the date they were made. For leavers, keep the leave balance, the dates used in the formula, the pay rate and how it was worked out, and any written agreement relied on for a deduction.