Rolled up holiday pay: A complete guide for UK employers (2026)

1. What is rolled up holiday pay?
2. When did rolled up holiday pay become illegal in the UK?
3. Who is eligible for rolled up holiday pay? 
4. What are the risks of rolled up holiday pay?
5. How to calculate rolled up holiday pay
6. Alternative to rolled up holiday pay
7. Rolled up holiday FAQ's
8. Next steps

All UK workers have the right to holiday pay – one week’s pay for each week of statutory leave. Holiday pay is normally paid separately from basic pay, but rolled up holiday pay bundles the two together into one payment. The worker receives a higher hourly rate to compensate for the fact they receive no separate holiday pay when they take annual leave.

From April 2024, rolled up holiday pay is lawful for eligible workers. It must be applied correctly to avoid compliance risks.

Rolled up holiday pay was ruled unlawful following the Robinson-Steele v R D Retail Services case in the European Court of Justice in 2006. The concern was that bundling holiday pay into regular wages could discourage workers from taking statutory leave. They would receive no extra pay when they took time off.

That remained the legal position until the Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 came into force. From 1 April 2024, rolled up holiday pay became lawful again, but only for irregular-hours and part-year workers, and only for leave years beginning on or after that date.

Is rolled up holiday pay legal now?

Yes. For leave years starting on or after 1 April 2024, rolled up holiday pay is legal for irregular-hours workers and part-year workers only. For employees on regular, fixed hours, it remains unlawful.

• Irregular hours workers - An irregular hours worker is defined by regulations as someone who works a number of paid hours in each pay period that is, under the terms of their employment contract, wholly or mostly variable. 
• Part-year workers - A part-year worker is someone who, under the terms of their employment contract, is only required to work for part of the year, with periods of at least one week in which they are not required to work and are not paid.

Rolled up holiday pay cannot be used for employees on regular, fixed-hours contracts, a full-time employee working 37.5 hours per week, for example. Those workers must receive holiday pay separately, at the time leave is taken.

Whilst rolled up holiday pay may now be legal in the UK for irregular hour and part-year workers, there can be some risks for businesses using this method of pay. These include:  

• Potential claims against your business for unlawful deduction of wages:

If calculations are incorrect, workers may receive too little or too much holiday pay depending on the number of hours that they have worked. This could lead to a potential claim against your business for unlawful deduction of wages.

• Double payments:

Workers may argue that they have been deterred from taking holidays, entitling them to ‘just and equitable’ compensation. This means the business could end up paying the employee both their rolled-up holiday pay and compensation.  

• Employee grievance:

If an employee feels they have received incorrect holiday pay, they could bring up a grievance against the business, leading to loss of managements time. 

• Discouraging leave: 

Employers still have a duty to ensure workers take statutory leave, even when rolled up holiday pay is used. Workers who have already received their holiday pay may be less inclined to take time off, but you should actively encourage workers to take their leave.

Having the correct payroll tools can help mitigate risk of payroll errors.

There are a few ways in which rolled up holiday pay can be calculated. However, it is the rolled up holiday pay percentage calculation that is used most often.

What is the rolled up holiday pay percentage?

Rolled up holiday pay is usually calculated at the rate of 12.07% of an employee's total pay in the pay period, on the basis of statutory entitlement to a legal minimum of 5.6 weeks holiday per year. For example: 

52 weeks per year minus 5.6 weeks statutory holiday entitlement = 46.4 working weeks.

Worked example 1: A worker earns the National Living Wage of £12.71 per hour (the rate from April 2026) and works 30 hours in a week. Basic pay: 30 × £12.71 = £381.30 Rolled up holiday pay: £381.30 × 12.07% = £46.02 Total pay: £427.32

Worked example 2: Zero-hours worker A zero-hours worker earns £14.00 per hour and works 25 hours in a given week. Basic pay: 25 × £14.00 = £350.00 Rolled up holiday pay: £350.00 × 12.07% = £42.25 Total pay: £392.25

The 12.07% uplift applies to total earnings in the pay period: bonuses, commission, and qualifying overtime included, not just the basic hourly rate.

How is rolled up holiday pay calculated for employees on zero hours contracts?

For zero-hours workers, the same 12.07% uplift applies. Calculate it on total earnings in the pay period - including any overtime, bonuses, and qualifying additional payments, not just the basic hourly rate. Because hours and earnings vary week to week, keeping accurate pay records each period is essential. Errors in the base figure flow directly into the holiday pay calculation and can result in workers receiving less than their statutory entitlement.

For a full breakdown, see our guide to calculating holiday entitlement for casual workers.

How must rolled up holiday pay appear on a payslip?

Rolled up holiday pay must be itemised separately from basic pay on the payslip. Absorbing it into the hourly rate without identifying it does not comply. Employers who fail to itemise it risk workers claiming they have never received their holiday pay entitlement. Even when they have.

If rolled up holiday pay does not suit your workforce, two alternatives are available:

• Accrual-based holiday payment:   

This is where an employee accrues holiday pay over the year, based on the number of hours in which they work. This method is calculated and paid separately to the employee's usual salary.  

• 52-week average:

Holiday pay is calculated on the average earnings over the previous 52 weeks, excluding weeks with no pay. This method is used for workers whose pay varies, for example, those with irregular overtime or commission. Regular-hours workers with fixed pay simply receive their normal pay when leave is taken.

Rolled up holiday pay requires accurate records, correct payslip itemisation, and up-to-date calculations. PeopleHR's payroll software handles all three: calculating holiday entitlement for irregular-hours and part-year workers and itemising it on every payslip.

Watch a 4-minute demo or get in touch with the team to find out how PeopleHR can simplify holiday pay for your business.