Minimum holiday pay entitlement regulations in the UK: How’s it calculated, who gets it, and why? 

“My wife, two children, and myself have just returned home after enjoying our first ‘holiday with pay’. We have had a good holiday, feeling for the first time that we could afford to pay for it without having to apologise to the butcher and baker for being unable to meet his bills the week after. I feel I am justified in saying ‘thank you’ to whoever it was who did the trick” from ‘Sunburned’, August 1938. 

Before that letter was published in the Midland Daily Telegraph, politicians, trade unionists, and ordinary British workers—aka the people ‘who did the trick’— had waged a 25-year campaign for every worker, regardless of social status, to receive annual paid leave from their regular employment. And when the first ‘Holidays with Pay Act’ was passed in 1938, as Mr. Sunburned would confirm, it was a cause for celebration.  

More than 80 years later, workers still have a right to paid annual leave, although nowadays it’s a little more generous and there’s a lot more to it.  

Calculations 

The basic entitlement and calculation are simple. Under the Working Time Regulations 1998 (WTR) all workers are entitled to 5.6 weeks’ paid annual leave, which is capped at 28 days per year. So, it doesn’t matter whether working patterns are irregular or part time—everyone gets their equivalent of 5.6 weeks per year, up to a maximum of 28 days. An employer can choose to give more but figures should be clearly laid out in employment contracts and holiday pay policies—they can’t give any less.  

For example, most people will be entitled to 28 days of paid holiday per year, based on a 5-day working week. For someone, who works 3 days a week the calculation would be 3 × 5.6, giving them 16.8 days of paid holiday per year. The calculation can be applied to hours worked too. So, if an employee has worked an average of 21 hours every week over the previous 52 weeks, the calculation would be 21 × 5.6 for a total of 117.6 hours leave per year.  

The exact calculations vary depending on actual time worked, which can be different for everyone. The best calculation guide can be found on the ACAS website or there is a handy online calculator if you prefer to keep things simple. But here’s a quick reference table: 

OK, so we can easily calculate holiday pay. But what about bank holidays? Or casual and zero hour workers? Can it be carried over to the next year? What if a worker starts part way through the year, or does overtime, or leaves and still has unpaid holiday to take… for that matter, what’s a worker?  

All great questions.  

Stick around, and you’ll be your HR department’s Holiday guru by the end of this article.  

Are bank holidays included? 

Apart from Christmas Day and Good Friday, it’s best to think of bank holidays as just that—holidays for banks. For everyone else, that means that bank holidays can be excluded from or included in the 5.6-week allowance depending on the terms of the employment contract. But many contracts do require holiday to be taken on the bank holiday.  

Can it be carried forward? 

In general, holiday pay shouldn’t be carried forward and employers should actively encourage workers to take all their allowance before the year end. 

In the days of Mr. Sunburned, paid leave was a bonus that workers could choose to enjoy. Nowadays, paid leave is treated as a health and safety issue, which means it’s there to protect workers from the dangers or overworking. Carrying holiday pay into the following year means the health and safety obligations for the current year aren’t being met.  

But… there’s always a ‘but’.  

The 5.6 weeks of statutory holiday is made up of two different types of paid leave. The first, which is concerned with health and safety, makes up 4 weeks of the total 5.6-week allowance (or 20 days for anyone working a 5-day week). Known as the Working Time Directive requirement—or more commonly ‘Euro leave’, for its roots in EU law—it must be taken in the year that it’s accrued.  

The remaining 1.6 weeks (or 8 days for those on a 5-day week) represents the number of annual bank holidays in the UK. Because this aspect of the holiday allowance isn’t concerned with health and safety issues, it can be rolled into the following year if both the employer and the worker agree.  

The only other exception to this, is if employers have mischaracterised the relationship between the employer and the worker as self-employment. If an employer fails to meet their paid leave obligations on that basis, then the worker can claim all their unpaid leave for the entire length of the contract, even previous years. 

So, what’s a worker? 

Good question. No 100% clear answer. But we’ll try. 

There are lots and lots of cases going through the Employment Tribunal system where ‘self-employed’ workers are asserting that they are in fact workers. This is largely based on a Supreme Court decision that Uber drivers—formally classed as self-employed and still considered to be self-employed for tax purposes—are, in fact, workers. That means that they’re entitled to holiday pay, national minimum wage, and other benefits. 

As the Uber website now states: 

“A worker is an employment classification that is unique under UK employment law. Workers are not employees. Workers are entitled to the National Living Wage, holiday pay and access to a pension. You will continue to have total flexibility, meaning you can choose if, when and where you work, while accessing new rights and protections.” 

While the UK government says that a worker is anyone who: 

• has a contract, either written or unwritten, to do work or service personally for a reward.  
• works for a reward of money or a benefit in kind, for example the promise of a contract or future work 

• has only a limited right to send someone else to do the work (subcontract) 
• can reasonably expect their employer to have work for them to do as long as the contract or arrangement lasts 
• is not doing the work as part of their own limited company in an arrangement where the ‘employer’ is actually a customer or client 

The best way to tackle this development and avoid a serious holiday pay back payment is to jump right it and conduct a wholescale audit of the arrangements with ‘self-employed’ contractors. If it’s likely that your contractors can consider themselves to be workers, then it’s also likely that they’re entitled to statutory paid leave.    

Who else is entitled to paid holiday leave? 

All employees and workers, including casual and agency workers have the right to accrue, take, and be paid for holiday leave. They can also build up (‘accrue’) holiday entitlement during maternity, paternity, adoption, and sick leave. And they can request to take holiday at the same time as sick leave. 

What about leavers? 

Under regulation 14 of the WTR, workers carry on accruing paid leave up to the date of employment termination. That means leavers are entitled to a one-off payment in place of (payment in lieu) any untaken leave, as calculated up to their leave date and regardless of whether they work their notice. Employers can also require employees to take their unused holidays, during their notice period, in keeping with the employee’s employment contract.  

Is it OK to pay rolled up holiday pay? 

Rolled up holiday pay is a payment in lieu of taking time off. In short, it’s unlawful. This goes back to the health and safety factor and protecting the wellbeing of workers, according to the Working Time directive requirement. So, any contracts that include rolled up holiday pay must be renegotiated.   

But… yep, another ‘but’—because the worker doesn’t lose out financially, assuming that holiday pay has been accurately calculated, rolled up holiday pay practices are yet to be properly tested in the British courts. That means that many workers still request it, and many employers still allow it, despite the possible health and safety implications and the fact that it could go against Working Time regulations, if it includes the 4-week ‘Euro leave’.  

Can employers refuse or dictate holiday dates? 

Yes, but only if there is a genuine business-related need. For example, a business might be seasonal or closed at certain times of the year, in which case employment contracts and holiday policies would specify that employees must use their annual leave entitlement during this time. Equally, there may be especially busy times of the year or times that specific employees must be at work. Again, this should be accounted for in holiday policies and contracts.   

Should workers give notice? 

Yes. According to the government website, workers should give a notice period at least twice as long as the intended leave, plus one day. So, if they want to take one day off, they should give 3 days’ notice.  

And if an employer intends to refuse or cancel the leave request, they should give a notice period at least as long as the period of leave, plus one day. For example, an employer should give 6 days’ notice if they want to refuse or cancel a leave request of 5 days.  

But an employment contract can specify different notice periods.  

Managing holiday entitlements 

It’s the employer’s responsibility to manage all things holiday pay related. And that means it’s the HR department’s responsibility. That includes, keeping track of how much holiday leave has been taken, how much is still available to take, holiday scheduling to avoid staff shortages, who is entitled to holiday pay, notifying, and encouraging anyone who hasn’t taken enough, and keeping policies and workers up to date. Phew! That’s a lot! 

Add to that all the complications surrounding flexible working, new starters, leavers, changing hours, and changing contracts, and you could have a real HR holiday headache on your hands.   

That’s where HR software can step in to make things a little easier and keep you on the right side of the legislation and regulations. With flexible holiday management tools and predictive features that’ll leave legacy HR software providers reaching for their yoga mat and their abacus, SenseHR is the only solution you’ll need to handle real-time requests, calculations, and policies. And we’ll keep your staff in the loop too, whether they’re classed as contractors, employees, or workers.