Holiday pay

Calculating holiday pay

A worker should be paid their normal wage while on holiday.

However, the way holiday pay is calculated differs depending on how they work.

A worker who works the same number of hours every week, and receives the same pay for those hours, should receive the same wage they would normally.

If you always earn £500 per week while at work, then you should be paid £500 per week while on holiday.

A worker who works different hours every week, or a worker who is paid based on how much work they complete, should be paid holiday pay that is an average of their previous 52 weeks of work.

This way the workers whole year is taken into account when deciding what they should be paid.

Any periods of sick leave should be left out of the calculation as it needs to be based on weeks when the worker was actually at work.

Should you receive overtime pay while on holiday?

The answer to this isn’t straightforward. The first point to be aware of is that not all holiday days are created equal.

Full-time workers in England are entitled to a minimum of 5.6 weeks of holiday per year.

This is made up of 4 weeks guaranteed by the EU Working Time Directive and an additional 1.6 weeks which comes from UK legislation.

The distinction between the two is important as they deal with overtime in different ways.

When calculating holiday pay for the 4 weeks provided by the EU Directive, recent case law has held that overtime payments should be taken into consideration if they extend over a sufficient period of time on a regular and/or recurring basis so that they become the norm.

There’s no hard and fast rule here, but if you work overtime every week and have done for a long time, then it’s arguable that it should be taken into account when your employer calculates your holiday pay.

However, for the additional 1.6 weeks provided by UK legislation, employers only need to pay overtime in holiday pay if the worker or employee taking holiday is “guaranteed” that overtime. This is because the Employment Rights Act states “where overtime is not guaranteed, statutory holiday pay is calculated by reference to the contractual hours only”.