Holiday pay – the basics
From January 1, 2024, statutory holiday (4 weeks of holiday pay each year) must be paid at ‘normal pay’ which should include:
- Payments (like commission) which are intrinsically linked to job performance
- Payments related to status (e.g. length of service, seniority, or professional qualifications)
- Other payments (like overtime) regularly made in the past 52 weeks
Statutory holiday vs. additional holiday
- Statutory holiday is 4 weeks a year
- The UK minimum holiday entitlement is 5.6 weeks per year
- The extra 1.6 weeks and any additional days offered by your business can be paid at basic rate. There are slightly different rules for irregular hours and part-year workers
Fixed pay vs. variable pay
- If an employee has regular hours and fixed pay, holiday pay should match what they normally earn
- For variable hours or pay, holiday pay should be calculated based on an average of earnings over the past 52 weeks
- For irregular hours or part-year workers, employers can use rolled-up holiday pay
Irregular hours and part-year workers
- These workers get holiday pay based on ‘normal pay’ rates for the full 5.6 weeks – either through rolled-up holiday pay or an equivalent calculation
- Holiday pay is treated as a single pot instead of the 4 statutory weeks plus 1.6 additional weeks.
No pay in lieu, during employment
Employees must take their holiday. As an employer, you can’t pay them for their holiday while they are working. When an employee leaves a job, any unused holiday can be paid out in lieu.
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