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How does holiday pay work?

You are most likely aware that you have the right to paid annual leave as part of your employment, but have you ever looked closely at what it is you receive and how it all works? If you want to know more about your holiday pay – and entitlement – then read on. We’re here to make sense of how holiday pay really works.

Holiday entitlement

Before you can calculate how much holiday pay you are entitled to receive, you need to know how much holiday you are allowed to take. So let’s break down what the rules are for statutory annual leave entitlement here in the UK.

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Full-time workers are legally entitled to 5.6 weeks paid holiday a year. This equates to 28 days paid leave. Now, one of the key things to note is that it is up to your employer as to whether bank holidays are included as part of your annual leave or not. In England and Wales, there are eight bank holidays a year, so if these were to be included as part of your 28-day annual leave allowance, then you would only have 20 remaining days of paid leave to take a year.

If you are part-time, your holiday entitlement is calculated based on the number of days a week you work. So, if you work three days a week, you would multiply this number by 5.6, meaning that you are entitled to at least 16.8 days paid leave a year. Once again, whether or not bank holidays are included is up to your employer, and this may largely depend on which days of the week you are contracted to work.

If you work irregular hours, then you are entitled to paid time off for every hour you work. The gov.uk website has a handy tool to help you calculate how many hours holiday you are entitled to based on how many hours you work.

Holiday pay

So, now you know your holiday entitlement, what does this mean in terms of pay? Every worker is entitled to a week’s pay for each week of statutory leave they take.

If you have fixed hours and fixed pay (whether you work full-time or part-time), the amount of pay you receive for a week’s holiday is the amount you would get for a week’s work.

Things are slightly different if you do shift work or have irregular hours. If you are a shift worker with fixed hours, your week of holiday pay is calculated by the average number of weekly fixed hours you have worked in the previous 12 weeks, at your average hourly rate.

If you don’t work fixed hours – so you undertake casual work including zero-hour contracts – then your average pay for the previous 12 weeks (only counting the weeks in which you have worked) will be used to calculate your week’s holiday pay.

Other things to know

You can still accrue paid annual leave if you are off on maternity, paternity or adoption leave. This is worth knowing, as that paid annual leave can sometimes plug the gap between the end of statutory maternity pay and returning to work. Alternatively, it could be used for a day off a week for a period of time after coming back to work, if your employer is agreeable.

Similarly, you can still build up holiday entitlement while off sick. If you are ill just before or during your holiday, you can take it as sick leave instead of holiday leave. If you do not qualify for sick pay, you can request to use your paid holiday to cover the time you are off sick.

Another thing to know is that your employer can choose to offer more days holiday than the legal minimum, but they do not have to apply all the rules that apply to statutory leave to the extra leave they offer. You may find that the longer you work for your employer, the longer the annual leave entitlement you qualify for will be.

Finally, your employer must pay you for your holiday when you take it. Previously there was something called ‘rolled-up’ holiday pay, where employers could spread the cost of your holiday pay over the year by adding an amount on top of your hourly rate and then not pay you when you actually take time off. This is no longer allowed, so if rolled-up holiday pay is in your contract, you should consider renegotiating it.

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