Holiday Pay Calculation UK: The 52-Week Average Rule (Post-2024)

UK holiday pay rules tightened in 2024. Most workers must now have their holiday pay calculated on average earnings over the previous 52 weeks, including regular overtime, commission and shift premiums. Many employers - especially in retail, hospitality and care - are still paying basic salary only. That can be unlawful.

This guide explains the current rules, gives worked examples for the four most common pay patterns, and tells you what to do if your holiday pay looks low.

The legal framework

Holiday pay rules in the UK come from:

• Working Time Regulations 1998 (4 weeks of EU-derived leave, plus 1.6 weeks UK additional leave = 5.6 weeks total = 28 days for a full-time worker).
• Employment Rights Act 1996 sections 221-224 - the "week's pay" calculation.
• Bear Scotland v Fulton (2014) - established that overtime should count towards holiday pay.
• Brazel v Harpur Trust (2022, Supreme Court) - confirmed the 52-week reference period for irregular-hours workers.
• Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 - codified the 52-week rule from 1 January 2024.

The combined effect: workers with variable earnings must receive holiday pay calculated on a 52-week rolling average that includes overtime, commission, shift premiums and certain allowances.

Workers in scope of the 52-week rule

The 52-week rule applies to:

• Workers with no normal working hours (e.g. zero-hours contracts, casual workers).
• Workers whose pay varies with the amount of work done (e.g. piece-work, commission-only, shift workers with variable shifts).
• Workers with normal hours BUT whose pay varies by reference to the time of work (e.g. shift workers with regular night/weekend premiums).

For workers with fixed regular hours and fixed pay (e.g. salaried 9-to-5 office workers with no overtime, no commission, no shift premiums), the calculation is simpler - holiday pay equals one week's normal pay.

What must be included

The current legal position requires inclusion of:

1. Regular overtime - both contractual (compulsory) and non-contractual (voluntary, IF it's regular enough that it can be considered "normal pay").
2. Commission - paid in arrears for work done before the holiday.
3. Shift premiums - night, weekend, bank holiday rates.
4. Performance bonuses - IF they relate to specific work done in the reference period.
5. Travel-time payments - where the travel is part of the working time.
6. Allowances paid in respect of the work - e.g. radius/responsibility allowances.

What is excluded:

• Expenses (genuine reimbursements, not pay).
• One-off discretionary bonuses unrelated to specific work.
• Tips and gratuities (separate Tipping Act 2023 regime).
• Statutory pay (SSP, SMP, SPP, ShPP) is excluded from the average AND from the 52-week count - those weeks are skipped.

The 52-week reference period

For each week of holiday taken, look back 52 weeks and average the pay received in those weeks. Skip:

• Weeks with zero pay (e.g. unpaid leave, statutory pay-only weeks).
• Weeks during which the worker received SSP, SMP, SPP, ShPP, or SAP (statutory parental and sick pay weeks are excluded).

If a worker has fewer than 52 weeks of paid history, use what's available. If they have less than one week of paid history (e.g. brand new starter), use whatever data exists.

If skipping leaves you with fewer than 52 paid weeks of history, you can look further back - up to a maximum of 104 weeks (two years) of look-back to find 52 paid weeks.

Worked example 1 - fixed salary, no variable pay

Alex earns £36,000/year, works 9-to-5 Mon-Fri, no overtime, no commission, no shift premiums.

Holiday pay for 1 day = (£36,000 ÷ 52) ÷ 5 = £138.46.

Simple. The 52-week average rule doesn't add complexity because the average is the same as the salary.

Worked example 2 - salary plus regular overtime

Priya earns £28,000/year base salary. She regularly works 5 hours' overtime per week at 1.5×, paid at her normal hourly rate of £14.42.

Without the 52-week rule (basic salary only): 1 week's holiday = £28,000 ÷ 52 = £538.46.

With the 52-week rule (including overtime):

• Weekly base: £538.46
• Weekly overtime: 5 × 1.5 × £14.42 = £108.15
• Average weekly pay: £646.61
• 1 day's holiday pay: £646.61 ÷ 5 = £129.32

That's £21.74 more per holiday day than the basic-only calculation. Over a 28-day annual entitlement, £608.72 more per year.

If Priya's employer is paying basic-only holiday pay, that's £608/year being underpaid. Over a four-year backdate window, £2,432.

Worked example 3 - variable hours (zero-hours)

Tom is on a zero-hours contract. He works varying hours week to week. In the 52 weeks before his current holiday request, his total earnings (net of statutory pay weeks) were £18,200 over 47 paid weeks (5 weeks were skipped - 3 unpaid leave, 2 SSP).

Average weekly pay: £18,200 ÷ 47 = £387.23.

For each holiday day Tom takes, he gets £387.23 ÷ 5 = £77.45.

His employer must look back 52 weeks and recalculate every time he takes leave.

Worked example 4 - rolled-up holiday pay (post-Jan 2024 change)

For irregular-hours workers and part-year workers (those who don't work all year, like term-time-only), the 2024 Regulations re-permitted rolled-up holiday pay - paying an extra 12.07% on top of every pay packet to cover holiday pay, instead of paying it when the leave is taken.

12.07% comes from 5.6 weeks ÷ (52 − 5.6 weeks) = 0.1207.

If Tom's employer rolls up, his every payslip should show:

Hours worked × hourly rate:        £400.00
Plus 12.07% rolled-up holiday pay:  £48.28
Gross pay this period:             £448.28

The rolled-up element must be clearly itemised on the payslip as "rolled-up holiday pay" - bundling it into the hourly rate is not lawful.

Rolled-up holiday pay is only permitted for workers with no normal working hours or part-year workers under the 2024 Regulations. For workers with normal regular hours, you cannot roll up - you must pay holiday pay when leave is taken.

How to spot under-payment on your payslip

Three patterns to check:

1. Holiday pay equal to your basic-salary day-rate when you work regular overtime. If your normal weeks include overtime/commission/shift premiums and your holiday weeks don't, the average is lower - that's underpayment.
2. No "holiday pay" line at all on a zero-hours contract. Either you're owed accrued holiday pay when you take leave, or your employer should be itemising rolled-up pay on every payslip - never just paying basic hourly rate.
3. Holiday pay not adjusting when you've recently had a particularly busy stretch (more overtime/shifts). The average should reflect it within 4-8 weeks.

What to do if it's wrong

1. Email payroll, in writing, with the dates and the calculation you think is correct.
2. Ask for the figure-by-figure breakdown they used.
3. Cross-check against the 52-week rule and the inclusion list above.
4. Escalate to Acas (0300 123 1100) for unresolved disputes.

You can claim back two years of underpaid holiday pay through an Employment Tribunal (under the Deduction from Wages (Limitation) Regulations 2014). Time limits apply - three months less one day from the deduction.

Disclaimer

PayslipIQ provides automated educational guidance based on the figures you supply. It is not regulated employment-law advice. Holiday-pay rules are case-law-developed and continue to evolve; for unresolved disputes or substantial underpayment claims, consult Acas, Citizens Advice, or an employment solicitor.