Holiday pay is the pay a worker receives for time off they are legally entitled to take — 5.6 weeks a year, which is 28 days for someone working five days a week. The entitlement is the easy part. What it should be paid at is where most payroll errors live, and since the rules for irregular hours and part-year workers changed for leave years beginning on or after 1 April 2024, a large number of employers are still calculating the old way.
The entitlement: 5.6 weeks, and what can sit inside it
Every worker — not just employees; agency workers and most casual staff too — is entitled to 5.6 weeks of paid annual leave. For a five-day week that is 28 days, and an employer may count bank holidays towards it: there is no standalone legal right to paid bank holidays. Part-timers get the same 5.6 weeks pro rata, so someone working three days a week is entitled to 16.8 days. Employers can offer more than the statutory minimum, and many do, but the extra contractual leave can carry different rules from the statutory core, which matters when you get to the pay calculation.
Leave must generally be taken in the leave year it accrues. The limited exceptions — sickness, maternity and other family leave — allow carry-over, and workers who could not take leave for those reasons can carry it forward, in the sickness case for up to 18 months. On termination, accrued but untaken statutory leave is paid out; there is no equivalent right to be paid in lieu of untaken leave while still employed.
Irregular hours and part-year workers: the 12.07% rule
For leave years beginning on or after 1 April 2024, irregular hours workers and part-year workers accrue holiday differently from everyone else. Instead of a fixed annual allowance, they build up entitlement at 12.07% of the hours actually worked in each pay period. The figure is not arbitrary: 5.6 weeks divided by the remaining 46.4 working weeks in the year gives 12.07%.
The same reform brought back rolled-up holiday pay — but only for these two categories. An employer can pay the 12.07% uplift alongside each payslip rather than when leave is taken, provided the amount is itemised separately on the payslip. For everyone else, rolled-up holiday pay remains unlawful, and the practice of quietly folding an uplift into an hourly rate for regular-hours staff is exactly the kind of arrangement that unravels expensively at tribunal. Classify by working pattern, not by contract type: the test is whether contracted hours are wholly or mostly variable, so a permanent employee on genuinely variable hours is an irregular hours worker, and a worker on a fixed rota is not one however casual the label on their contract.
The definitions matter more than employers expect. A part-year worker is someone who, under their contract, works only part of the year and is unpaid for the rest — a term-time-only employee on an annualised contract is the classic case, and getting that classification wrong in either direction produces systematic underpayment or overpayment across an entire workforce.
What a week's pay is worth
For workers with normal working hours and fixed pay, a week's holiday pay is a week's pay. For everyone else, the calculation uses a 52-week reference period: average the pay from the last 52 complete weeks in which the worker earned something, skipping weeks with no pay and looking back up to 104 weeks to find them. If a worker has been employed for less than 52 weeks, you use however many weeks are available.
Then comes the split that catches out even well-run payrolls. The 5.6 weeks is not one homogeneous entitlement:
- The first 4 weeks must be paid at "normal remuneration" — which includes commission intrinsically linked to performing the job, regularly worked overtime, and payments linked to professional or personal status such as length-of-service supplements;
- The remaining 1.6 weeks need only be paid at basic pay.
- The split applies to regular-hours workers only. For irregular hours and part-year workers on the post-April-2024 rules, all 5.6 weeks are paid at normal pay — there is no basic-rate 1.6 weeks for them;
Employers are free to pay the whole 5.6 weeks at the higher rate, and most do, because tracking which four weeks a worker has taken is more administrative effort than the saving justifies. What you cannot do is pay basic-only across the lot — that is the error behind a long run of tribunal claims from commission-earning and overtime-heavy workforces.
Where the money leaks
The recurring faults we see in payroll reviews are consistent enough to list:
- 12.07% applied to fixed-hours staff. The accrual method is for irregular hours and part-year workers only; using it for a regular part-timer understates their entitlement;
- Rolled-up pay for regular-hours workers, still unlawful, and usually undocumented;
- Basic pay used for all 5.6 weeks where commission or regular overtime is part of the job;
- Reference periods that include unpaid weeks, dragging the average down;
- No itemisation of rolled-up holiday pay on the payslip, which invalidates the arrangement even where it was otherwise permitted;
- Termination payments calculated on days rather than the statutory week, which understates the final figure for anyone whose pay varies.
There is now a record-keeping duty behind all of this. Since 6 April 2026 employers have had to keep records adequate to show that annual leave entitlement and holiday pay obligations have been met, and to retain each record for six years from the date it was made — a rolling six years, not six years from April 2026. Failure to keep them is an offence, and in a back-pay dispute the absence of records is what turns an arguable position into an expensive one. This is separate from the older two-year retention rule for working time records, which has never covered holiday.
None of these are exotic. They are arithmetic, applied consistently in the wrong direction across dozens or hundreds of workers — which is how a modest per-person error becomes a six-figure exposure with interest, and why holiday pay features so often in the first hour of a payroll due diligence.
Getting it right without rebuilding payroll
The practical route is a short audit rather than a policy rewrite: classify the workforce properly (fixed hours, irregular hours, part-year), check which leave year each population is on, test a sample of holiday payments against the 52-week method, and confirm the payslip presentation for anyone on rolled-up pay. Most employers find one population is being handled incorrectly and the rest is fine — which makes the fix narrow and the back-pay exposure quantifiable.
Acumon's payroll management and outsourced payroll teams run these calculations as standard, and a payroll audit is the quickest way to find out whether your holiday pay stands up before someone else tests it. Holiday pay is one of the few payroll errors that compounds silently for years — and one of the easiest to settle once you have measured it.