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UK Payroll Glossary

Holiday pay

Holiday pay is the payment an employee receives while taking their statutory or contractual annual leave. UK law sets a minimum entitlement of 5.6 weeks per year (28 days for a full-time worker, inclusive of bank holidays unless the contract treats them separately), and that pay must reflect the employee's normal earnings — not just their basic salary. Regular overtime, commission, and certain allowances must be included based on rulings by the UK Supreme Court and subsequent statutory updates. Getting holiday pay wrong is one of the most common employment-law errors among small UK employers.

Last updated May 2026

Statutory minimum entitlement

Every worker — not just employees with full employment contracts — is entitled to 5.6 weeks of paid annual leave per year under the Working Time Regulations 1998. For a full-time worker working five days a week, that is 28 days per year. The 28 days can include the eight UK bank holidays, provided the employment contract says so; if the contract gives bank holidays on top of the 5.6 weeks, the worker gets 36 days in total.

Part-time workers receive the same entitlement pro-rated to their working hours. A worker on three days a week is entitled to 5.6 × 3 = 16.8 days per year (rounded up to the nearest half-day).

The 5.6 weeks is a statutory floor. Many employers offer more — six weeks or four weeks plus bank holidays are common — and that contractual entitlement is what governs the day-to-day relationship. The statutory minimum remains the binding legal baseline: any contractual entitlement below 5.6 weeks would be unenforceable.

What counts as 'normal pay'

The most significant legal development in UK holiday pay in recent years has been establishing what wage must be paid during leave. The basic-salary-only approach used by many employers for decades was found unlawful in a series of cases:

  • Bear Scotland v Fulton (EAT, 2014) — regular non-guaranteed overtime must be included in holiday pay for the four weeks' leave derived from the EU Working Time Directive.
  • Williams v British Airways (CJEU/Supreme Court) — payments intrinsically linked to the tasks the worker is required to carry out must be reflected in holiday pay.
  • UK statutory update (2023 regulations) — the Working Time Regulations were amended to clarify that regular commission, regular overtime (guaranteed and non-guaranteed), and certain regular allowances must be included in holiday pay calculations.

In practice, employers use the 12 or 52-week reference period look-back (whichever statutory rule applies) to calculate an average that reflects what the worker normally earns. One-off payments — a discretionary end-of-year bonus, a redundancy payment — are excluded. The rule does not require every bonus to inflate holiday pay, only the components of pay that are regular and linked to the work performed.

Rolled-up holiday pay

Rolled-up holiday pay is a method of paying holiday entitlement used for workers on irregular hours or part-year contracts (for example, term-time workers or casual bank staff). Rather than paying a separate amount when leave is taken, the employer adds a 12.07% uplift to the worker's pay for each hour or period worked, and the worker takes leave unpaid.

Rolled-up holiday pay was for many years legally uncertain in the UK after a CJEU ruling implied it was unlawful. The Employment Relations (Flexible Working) Act 2023 and the subsequent amendments to the Working Time Regulations clarified the position: rolled-up holiday pay is legal from 1 April 2024 for irregular-hours workers and part-year workers only — it remains unlawful for regular employees on fixed schedules.

The 12.07% rate is derived from 5.6 ÷ (52 − 5.6) = 12.07%. Employers who use this method must show the rolled-up element as a separate line on the payslip so workers can see how much of their pay relates to leave.

In Ghugi terms: Holiday pay appears on the payslip as a line item — either as a separate payment when leave is taken, or as a rolled-up percentage added to each period's pay. Ghugi delivers whatever payslip PDF your payroll software produced; it doesn't calculate pay figures.

Related terms

Gross payGross pay is the total an employee earns before any deductions — salary or hourly pay, plus overtime, bonuses, commission,…PayslipA payslip is the document showing what an employee was paid for a specific period — usually a week or a month.Worker (vs Employee)In UK employment law, "worker" is a broader category than "employee".National Minimum Wage & National Living WageThese are the legal minimum hourly rates UK employers must pay.

Authoritative source

gov.uk: holiday entitlement →

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Disclaimer: This glossary is for general guidance. Specific UK tax thresholds and statutory rates are checked at publication and re-reviewed every April; always verify against the official gov.uk pages for the current tax year. Ghugi is not a payroll provider and does not give tax or legal advice. For your situation, ask your accountant or HMRC directly.