Holiday Entitlement in the UK: A Comprehensive Guide

Holiday entitlement in the UK is an important employment right. It ensures that workers have enough time to rest throughout the year.

The statutory framework for holiday entitlement is set out in the Working Time Regulations 1998.
Both employers and employees need to understand these rules to stay compliant and promote fair treatment at work.

Statutory Entitlement and Bank Holidays

In the UK, full-time workers are entitled to 5.6 weeks of paid holiday each year. This equals 28 days if you work 5 days a week. These 28 days can include bank holidays, depending on what is written in the employment contract. Some contracts offer bank holidays in addition to the 28 days. Others include them within the total. Either way, it should be clearly explained in the contract.

Many workplaces close on bank holidays, but employers are not legally required to give these days as paid leave unless the contract says so. In industries like healthcare, retail, and hospitality, staff often work on bank holidays. If they do, employers must still provide the full annual leave. Some employers may offer extra pay or time off to make up for working these days.

Holiday Entitlement for Part-Time and Irregular Hours Workers

Statutory holiday entitlement applies to everyone, including part-time, casual, or zero-hours workers.

For part-time staff, leave is worked out pro-rata, based on how many hours they work. For example, someone working three days a week would get 16.8 days of leave (3 × 5.6).

For workers with irregular hours, holiday entitlement is often calculated using a reference period. One method uses 12.07% of hours worked. This figure comes from dividing 5.6 weeks by 46.4 working weeks in a year.

However, in the past court decisions have questioned this method, although recently it has been reinstated as an approved method. May employers prefer using average earnings over the past 52 weeks—excluding any weeks with no work—to calculate holiday pay.

Reforms to Holiday Pay in 2024

Important changes were introduced in 2024 to make holiday pay clearer and fairer, especially for workers with changing work patterns.

Updates to the Working Time Regulations include:

• New rules for calculating average pay.

• Clearer guidance on rolled-up holiday pay.

• Better clarity on how leave is earned for workers with irregular hours.

Employers should check and update their payroll systems and holiday policies. Failing to follow the new rules could lead to legal issues or financial penalties.

Backdated Holiday Pay and the Three-Month Rule

The three-month rule limits how far back workers can claim for unpaid holiday pay.

They can only claim if the underpayments form a continuous series. If there is a break of more than three months, older claims are no longer valid.

To avoid problems, employers should make sure their holiday pay is accurate and up to date. This helps prevent backdated claims and legal disputes.

Payslip Transparency and Holiday Pay

There is no legal rule requiring employers to show holiday pay on payslips. However, many employers choose to do so because it improves clarity and transparency.

Showing holiday pay separately makes it easier for employees to check they are being paid correctly. Employers can list it as a separate item or include it in base pay—as long as the correct amount is paid.

Unused Holiday and Termination of Employment

If an employee leaves their job, they must be paid for any unused holiday they have earned.

This is calculated based on the portion of the holiday year they have worked. If they have taken more leave than they are entitled to, the employer may deduct the extra from their final pay—but only if this is stated in the contract.

If an employee is made redundant, they must still be paid for any holiday they have not used.
Employers must handle these matters carefully and in line with employment law to avoid disputes.

Holiday Entitlement Adjustments and Long-Term Absence

Sometimes, employers may want to make changes to holiday entitlements as part of broader contract changes.

However, holiday entitlement cannot fall below the legal minimum of 5.6 weeks. Any change must be agreed with the employee. Employers should give at least twice the amount of notice as the holiday period being changed.

Employees continue to accrue holiday during long-term sick leave. If they cannot use their leave before the holiday year ends, it can be carried over, within legal limits.

When the employee returns to work, they should be given the chance to use their accrued holiday.

Fairness for Part-Time Workers

Part-time workers must receive the same holiday rights as full-time staff.This includes bank holidays, which should be calculated proportionally. Fair treatment in holiday entitlement helps create a positive and equal workplace.

Conclusion

Understanding holiday entitlement in the UK is important for both employers and employees.
It ensures compliance with the law and promotes fairness at work.

Employers should regularly review their policies to keep up with legal changes. Clear and consistent rules help prevent disputes and support employee wellbeing.