Employment Tax

Holiday pay

Produced by Tolley in association with Sarah Bradford
  • 21 Dec 2021 16:41

The following Employment Tax guidance note Produced by Tolley in association with Sarah Bradford provides comprehensive and up to date tax information covering:

  • Holiday pay
  • Statutory holiday pay
  • Calculating statutory holiday pay
  • Overtime
  • Rolled up statutory holiday pay
  • Statutory holiday pay on termination
  • Contractual holiday pay
  • Contractual and statutory holiday pay

Holiday pay

The right to be paid for holidays is a statutory entitlement and there may also be a further contractual entitlement. Almost all workers are entitled to 5.6 weeks paid holiday per year (which can include bank holidays). Self-employed workers have no statutory leave entitlement.

Due to the coronavirus (COVID-19) pandemic, the Government has announced new regulations in relation to rolling over holiday into the next two years, see the Effect of coronavirus (COVID-19) on carrying over annual leave guidance note.

Statutory holiday pay

The Working Time Regulations 1998 entitle a worker to be paid:

  1. during his statutory holiday, entitlement of 5.6 weeks a year

  2. in lieu of any statutory holiday entitlement accrued but unused on termination of his employment

This does not prevent an employer offering a more generous annual paid leave entitlement as part of a contract of employment.

Calculating statutory holiday pay

During any period of statutory holiday, a worker is entitled to be paid at the rate of a week’s pay for each week of holiday.

The Employment Rights Act sets out the method of calculating a week’s pay except that references to ‘employee’ in the ERA 1996 should be read as ‘worker’ and ‘the calculation date’ should be read as ‘the first day of the period of leave in question’.

The reference period used to calculate holiday pay is 52 weeks (extended from 12 weeks) from 6 April 2020.


Not all overtime is equal when it comes to holiday pay. There are different categories of overtime:

  1. guaranteed overtime

  2. non-guaranteed overtime

  3. voluntary

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