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. 

However 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 right is based on European Union law. It reflects the important principle of EU law that holiday has a health and safety purpose and that workers must not be deterred from taking their holiday by the threat of losing pay.
             
Your holiday pay must reflect, 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 rulings at the European Court of Justice improving the rate of holiday pay for all workers. 

For any 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 then a separate question, which is how to work out a “week’s pay”.

If you have no normal working hour (for example, many zero hours contract workers) a week's pay is will be the your average weekly pay that you earned over the 12 weeks immediately before taking your holiday. If you have done no work in any of those twelve weeks, your employer must go back in time to the next earlier week in which you worked. 

(From April 2020, the government plans to change this law so that for workers with variable pay, their holiday pay will be averaged over 52 weeks, instead of 12.)   
For piece workers, a week's holiday pay is the average pay received over the previous 12 week-period in which they were paid.

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

Note: This content is provided as general background information and should not be taken as legal advice or financial advice for your particular situation. Make sure to get individual advice on your case from your union, a source on our free help page or an independent financial advisor before taking any action.

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