How to calculate holiday pay in the UK
Working out how much holiday someone is owed is one problem. Working out what to pay them for it is a separate one — and for anyone whose hours or earnings vary, it is the harder of the two.
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Key takeaways
- Staff on fixed hours and fixed pay get a normal week’s pay for a week of holiday — no averaging needed
- Where pay varies, holiday pay is based on average weekly pay across a 52-week reference period
- Weeks with no pay at all are skipped and an earlier week used instead, looking back up to 104 weeks
- Regular overtime, commission and shift premiums generally form part of normal pay and should be in the average, not excluded from it
Fixed hours, fixed pay
If someone works the same hours each week for the same money, a week of holiday is paid at a normal week's pay. There is no averaging and no reference period. Most salaried staff never notice holiday pay as a separate calculation at all, because it simply is their salary.
Variable hours or variable pay: the 52-week reference period
Where pay varies — different shift lengths, unsocial-hours premiums, commission, regular overtime — holiday pay is based on average weekly pay across the 52 weeks before the holiday.
The rule in three steps
- Take the 52 weeks immediately before the holiday begins.
- Discard any week in which the worker received no pay, and substitute the next earlier paid week — going back up to 104 weeks if needed.
- Average the pay across those weeks. That average is a week's holiday pay.
If the worker has fewer than 52 paid weeks of service, use however many complete paid weeks exist.
Step two is the one most often missed. Skipping unpaid weeks matters enormously for anyone returning from long-term sickness or a period of no work — averaging in a run of zero-pay weeks would drag the holiday rate well below what the person normally earns, which is precisely what the rule exists to prevent.
What goes into the average
The principle is that holiday pay should reflect normal pay — what the person actually earns for doing their job. Nobody should be financially worse off for taking the leave they are entitled to.
| Payment | Generally part of normal pay? |
|---|---|
| Basic pay for contracted hours | Yes |
| Regular overtime | Yes |
| Shift and unsocial-hours premiums | Yes |
| Commission earned as a normal part of the role | Yes |
| Genuinely occasional, one-off payments | Treated differently — check the facts |
The distinction is regularity, not the label. Overtime described as "voluntary" but worked every week looks a lot like normal pay. Where a payment sits close to the line, the safer reading is usually to include it.
One thing the average cannot do is rescue an underlying rate that was too low. If the hours in the reference period were themselves paid below the National Minimum Wage, the holiday pay built on them is wrong as well — and the arrears run across both.
Doing this every time someone books a week off
A 52-week average, recalculated per worker, per holiday, skipping unpaid weeks, and including premiums and overtime, is not a spreadsheet job for a team of any size. It is also not a calculation anyone wants to be reconstructing two years later in response to a query.
Where the hours are already captured — clocked in and approved — the pay history needed for the average is there too. RosterElf's holiday management keeps the entitlement and the record together, and exports approved timesheets to Xero so the figures reaching payroll are the ones the rota actually produced. When someone leaves, the same basis is used for the accrued balance — see final pay when someone leaves — and overtime and unsocial hours pay covers why regular overtime belongs in the average.
Keep the pay history holiday pay depends on
Clocked hours, approved timesheets and holiday balances in one place — and a clean export to payroll.
This guide summarises how UK holiday pay is generally calculated and is not legal or payroll advice. What counts as normal pay has been shaped by case law and depends on the facts of each arrangement. Check GOV.UK or take advice before relying on it for a specific calculation. It does not constitute legal, HR, or professional advice and should not be relied on as a substitute for advice specific to your business, workforce, or circumstances.
UK holiday pay questions
- For a worker with fixed hours and fixed pay, a week of holiday is paid at a normal week’s pay. Where hours or pay vary, holiday pay is the average weekly pay over a 52-week reference period ending before the holiday starts.
- The 52 weeks immediately before the holiday. Any week in which the worker received no pay is left out and an earlier paid week substituted, looking back as far as 104 weeks. If fewer than 52 paid weeks exist, you use however many there are.
- Regular overtime that forms part of normal pay generally should be included, as should commission and shift or unsocial-hours premiums where they are a normal part of what someone earns. Genuinely occasional, one-off payments are treated differently. If a payment is a routine part of the wage, it belongs in the average.
- Irregular-hours and part-year workers can be paid rolled-up holiday pay at 12.07% for leave years beginning on or after 1 April 2024, in which case the 52-week averaging does not apply to them. See our part-time and irregular hours guide.