What rate should my holiday pay be set at?

You are entitled to be paid at the rate of a “week's pay” in respect of each week of leave. As a matter of strict legal entitlement, what rate your holiday pay must be set at depends on whether you are talking about:  

• the first four weeks of your holiday entitlement (all workers are entitled to this holiday under the Working Time Directive);  
•  the extra 1.6 weeks of holiday you get under UK law; or  
• any extra holiday you get under your employment contract over and above the statutory minimum of 5.6 weeks including bank holidays.   

In practice, most employers like to keep things simple and pay you at the same rate of pay across the whole of your holiday entitlement, regardless of its legal basis.  

For the first 20 days of your holiday, you have the legal right to be paid your ‘normal wages’, as if you were at work. This is because holiday – the need for rest from work - has a health and safety purpose. And the law says that workers must not be deterred from taking their holiday by the threat of losing pay.  
               
Your holiday pay must reflect your normal earnings and must include, for example:  

• overtime pay, including regularly worked voluntary overtime;   
• shift overrun payments;  
• travel-time payments;  
• payments for seniority, length of service and professional qualifications;  
• call out allowances;  
• out-of-hours standby pay;  
• shift premium payments;  
• weekend premium payments;  
• anti-social hours payments;  
• results-based commission payments; and  
• any other regular payment linked to work.     

Trade unions have won landmark legal rulings improving the rate of holiday pay for all workers.   

For the extra holiday over and above the 4 weeks provided for under the Working Time Directive, the rate of pay will depend on what your employment contract says. Where a union is recognised, better rates may be negotiated through collective bargaining.   

Whatever your contract says, your employer must always pay at least the National Minimum Wage for your holiday.    
 For people whose working hours vary, there is the separate issue of how to work out a “week’s pay”.  

If you have no normal working hours (for example, many zero hours contract workers) a week's pay will be your average weekly pay that you earned over the 52 weeks immediately before taking your holiday. If you have done no work in any of those 52 weeks, your employer must go back to the next earlier week in which you worked.   

This 52-week reference period has been introduced as a change to the law from April 2020. Before this, employers had to average weekly pay over the preceding 12 weeks.  

There is information on the gov.uk website explaining how holiday must be calculated over the 52 weeks, as well as some worked examples.   

Acas also has helpful information about calculating your holiday over this new 52- week reference period.   

If you are unsure, contact your union if you are a union member. If not, contact the Acas helpline or Citizens Advice.   

Your  written statement of particulars must specify the terms relating to holidays and holiday pay.