Rolled-up Holiday Pay
Overview
Rolled-up holiday pay allows employers to include an additional amount with every payslip to cover a worker’s holiday pay, as opposed to paying holiday pay when a worker takes annual leave.
The regulations allow employers to use Rolled-up Holiday Pay as an additional method for calculating holiday pay for irregular hour/s and part-year workers only, for leave years beginning on or after 1 April 2024.
Edition
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Details
Rolled-up Holiday Pay Calculation
The calculation of holiday pay by employers is 12.07% of a worker’s total pay, as 12.07% is the proportion of statutory annual leave in relation to the working weeks of each year.
For example, 5.6 weeks of statutory annual leave divided by 46.4 working weeks of the year.
Employers using rolled-up holiday pay should calculate it based on an employees total pay in a pay period. A pay period is the frequency at which employees are paid (weekly, fortnightly, monthly).
Rolled-up holiday pay is to be paid in addition to the employees normal salary, which should be at National Minimum Wage or above. If annual leave is carried over where an employee is paid using rolled-up holiday pay, the leave will already have been paid at the time the work was done.
Employers that do not wish to use rolled-up holiday pay for irregular hour and part-year workers can continue to use the existing 52-week reference period to calculate holiday pay for irregular hour workers, as set out in section 6.3 below.
Section 6.3
A 52-week reference period to calculate holiday pay
Where an employee has irregular hours or works part of the year, employers can calculate their holiday pay using an average from the last 52 weeks in which they have worked and have earned pay. If an employee has not been in employment for long enough to build up 52 weeks’ worth of pay data, the employer should use however many complete weeks the employee has worked.
For example, if an employee has been with their employer for 26 complete weeks, that is what the employer should use in the calculation.
If an employee takes leave before they have been in their job a complete week, then the employer has no data to use for the reference period. In this case the reference period is not used. Instead, the employer should pay the employee an amount which fairly represents their pay for the length of time the employee is on leave.
In working out what is fair, the employer should take into account:
- The worker’s pay for the job.
- The pay already received by the worker (if applicable).
- What other employees doing a comparable role for the employer (or for other employers) are paid.
Should an employee who receives rolled-up holiday pay go off sick or takes maternity / family-related leave during a pay period, their rolled-up holiday pay would be calculated according to the average amount of the employees total earnings in each pay period during the 52-week relevant period.
Tables 6 and 7 below set out how to calculate how much rolled-up holiday pay a worker could receive under different scenarios.
Example: holiday entitlement when paid weekly
Employee A works irregular hours and is paid weekly. Their hourly rate is £10.42 per hour for all shifts. In the week 1 October to 7 October, and worked 35 hours.
To work out how much rolled-up holiday pay employee A is entitled to, you will need to calculate 12.07% of employee A's total pay in this pay period.
Example: holiday entitlement when paid fortnightly
Employee B works irregular hours and is paid fortnightly. Their hourly rate is £11 per hour (normal hourly rate) for shifts 7am to 11:59pm and £12 per hour (enhanced hourly rate) for shifts midnight to 6:59am. In the fortnight 1 August to 14 August, and worked 40 hours. They worked 20 hours at normal rate (£11 per hour) and 20 hours at an enhanced rate (£12 per hour).
To work out how much rolled-up holiday pay employee B is entitled to, you will need to calculate 12.07% of the employees total pay in this pay period.
Note!
As Table 7 shows, the calculation for rolled-up holiday pay applies to an employees total pay in a pay period, regardless of differing hourly rates of pay.
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