Holiday Pay 2025
In 2025, employers with a January–March annual leave year can choose to implement rolled-up holiday pay for part-time and irregular hours workers. Holiday pay reforms brought in last year apply to holiday years that began on or after April 1, 2024.
Workers who began their holiday year in January 2024 will transition to the new rules when their next holiday year started this January (2025).
The aim of the reform is to simplify holiday entitlement and holiday pay calculations for irregular hours and part-year workers.
The standard holiday pay rate in the UK is calculated at 12.07% of an employee's average earnings over the previous 52 weeks which is based on the statutory minimum of 5.6 weeks paid holiday (the equivalent to 28 days for those working 5 days a week), allowing employers to incorporate this amount into the employee's regular pay ("rolled-up holiday pay") for workers with irregular hours or part-time schedules
What's changing?
Holiday pay calculation: Holiday entitlement is calculated as 12.07% of the hours worked in a pay period.
Rolled-up holiday pay: This option allows employers to include holiday pay in an employee's regular pay, particularly beneficial for workers with inconsistent hours.
Wage slips: Employers must show holiday pay and wages separately on wage slips.
Who's affected?
Part-time workers
Employees who work the same number of hours each week are entitled to 5.6 times the number of days they work.
Irregular hours workers
Employees whose hours are mostly or entirely variable, such as those on zero-hours or casual contracts.
Why the change?
The new rules aim to ensure fairer and more consistent holiday pay calculations while providing a clearer definition of "normal remuneration" for the four weeks of statutory annual leave. Legislation now defines "normal remuneration" to include payments linked to work performance, professional status, and regular payments from the past 52 weeks. Additionally, new regulations establish clear guidelines for holiday entitlement and pay for irregular hours and part-year workers.
Accrual on statutory leave
Holiday entitlement will continue to accrue during statutory leave, such as sick or family leave.
For employers using a leave accrual system, a 52-week reference period must be used to calculate the average hours worked. Weeks that include statutory leave should be excluded, while weeks with no work or pay should be included.
For those using rolled-up holiday pay, the average holiday pay elements from the reference period should be used, following the same inclusion and exclusion criteria.
Key points:
· Irregular hours workers have variable contracted hours, including zero-hour contracts.
· Part-year workers work only part of the year, with unpaid periods (e.g., seasonal workers).
· Average earnings calculation: Holiday pay is based on the average of an employee's earnings over the previous 52 weeks, ensuring a more accurate reflection of their typical pay
For leave years from 1 April 2024, employers can choose between:
Accrued holiday entitlement – 12.07% of hours worked, banked and taken as leave.
Rolled-up holiday pay – paid each period as 12.07% of total pay, now legally allowed.
If you need professional assistance with payroll, contact our team today for expert support.
Source: Gov.uk
