Ah, holiday pay — the thing every employee loves, every employer dreads, and every payroll person has nightmares about.
( At Love Payroll Limited we can handle all of this for you so you don’t need to read further)
Because let’s be honest: if there’s one part of payroll guaranteed to cause mild confusion, it’s trying to figure out what counts as “a week’s pay.” Spoiler: it’s not always a week, and it’s not always pay.
And just when we thought we’d cracked it, new rules and future reforms keep popping up like “surprise!” pop quizzes from the government.
So, before anyone reaches for a stress ball, let’s break it down properly.
💬 First, What Is Holiday Pay Supposed to Cover?
In simple terms, holiday pay should reflect what a worker normally earns.
Not the bare minimum. Not a random guess. And definitely not “whatever’s left in the budget.”
It’s designed to make sure workers aren’t financially worse off for taking time off — because that defeats the whole purpose of a holiday (which, let’s be honest, is to lie down and pretend your inbox doesn’t exist).
🧮 How to Calculate Holiday Pay (Right Now)
At the moment, holiday pay depends on the type of work pattern:
1️⃣ Fixed Hours, Fixed Salary Workers
Easy! (Well… easier.)
They get the same pay during holidays as they do normally.
No maths required — we love that for them.
👉 GOV.UK: Holiday entitlement and pay
2️⃣ Variable Hours or Irregular Hours Workers
This is where the fun starts.
Holiday pay is based on an average of earnings over the previous 52 paid weeks, including:
✔ Overtime
✔ Bonuses
✔ Commission
✔ Regular allowances
If it’s something they normally earn, it should be included.
Yes, even those Saturday overtime shifts they swear they “never do.”
👉 Acas: Holiday pay and entitlement
💡 A technical note for the payroll purists:
For most workers, the 4 weeks of EU-derived leave (Reg 13) must reflect normal pay — including regular overtime or commission — while the extra 1.6 weeks (Reg 13A) can be paid at basic pay. Many employers, for simplicity, just pay all at the normal rate.
3️⃣ Part-Year and Irregular-Hours Workers (Since April 2024)
Here’s where the rules got a refresh — and this is the one to watch in 2025.
For leave years starting on or after 1 April 2024, part-year and irregular-hours workers now accrue statutory holiday at 12.07 % of hours worked (up to 5.6 weeks).
Employers can also use rolled-up holiday pay, meaning you can include holiday pay within regular pay periods — as long as it’s shown clearly on the payslip.
👉 GOV.UK: Calculating holiday entitlement for irregular hours and part-year workers
👉 Acas: Irregular-hours and part-year workers
(Yes, that’s now officially allowed — no need to whisper it anymore.)
🗓️ What’s Changing in April 2026?
Here’s where your future payroll brain kicks in.
The Employment Rights Bill (expected April 2026) brings a few important updates — but not another rewrite of holiday pay calculations (phew).
Instead, expect:
✔ Day-one rights to paternity leave and ordinary parental leave
✔ Statutory Sick Pay from day one, with the lower-earnings limit removed
✔ The creation of a new Fair Work Agency to enforce employment rights — including holiday pay
👉 GOV.UK: Employment rights reforms 2026 (press release)
So while the holiday-pay formula itself isn’t changing again (for now), there’s a definite push for clearer, fairer, and better-enforced rights across the board.
Basically: payroll’s not off the hook, but at least we’ll have clearer rules — and a referee.
❤️ The Love Payroll Bit
At Love Payroll, we keep up with every update — past, present, and the ones the government sneakily drops at 4 pm on a Friday.
We calculate holiday pay correctly, keep your business compliant with upcoming law changes, and explain it all in friendly English instead of HR gobbledygook.
So whether you’ve got fixed-hours staff, variable workers, or the entire cast of a payroll soap opera, we’ll make sure holiday pay is spot-on — now and when the 2026 laws take effect.
Because holidays should be relaxing.
Holiday pay calculations? Leave those to us. 🌴☕️
📚 Further Reading
- GOV.UK – Holiday entitlement and pay
- Acas – Holiday pay and entitlement
- Acas – Irregular-hours and part-year workers
- GOV.UK – Holiday entitlement for irregular hours and part-year workers
- GOV.UK – Employment Rights Bill updates 2026
