Holiday pay is one of those areas where employers think they’ve got it right until a tribunal claim lands on the desk. Holiday-pay mistakes can create historic underpayment and tribunal risk. The rules changed significantly in April 2024, and if you employ anyone on variable hours, zero hours contracts, or seasonal patterns, you need to understand exactly how those changes affect your calculations.
This guide covers the current rules for calculating holiday pay for irregular hours and part year workers, including the 12.07% accrual method, the 52 week reference period, and the rolled up holiday pay option that became lawful again in 2024.
Who counts as an irregular hours or part year worker?
The definitions matter here because the 2024 rules only apply to these two categories. Everyone else stays on the standard calculation method.
An irregular hours worker is someone whose paid hours in each pay period are, under the terms of their contract, wholly or mostly variable. Think zero hours contracts, bank staff, casual workers, or anyone whose weekly hours genuinely fluctuate rather than following a set pattern.
A part year worker is someone who only works for part of the year under their contract, with periods of at least a week where they’re not required to work and aren’t paid. Term time workers are the classic example here.
If your employee works a fixed 37.5 hours every week, they don’t fall into either category regardless of the job title. The classification depends on what the contract actually says about their hours.
The 12.07% accrual method
For leave years starting on or after 1 April 2024, irregular hours and part year workers accrue holiday entitlement at 12.07% of actual hours worked in each pay period. This is now the default method for these workers, and it replaced the previous approach that caused so much confusion after the Supreme Court’s Harpur Trust decision in 2022.
The maths behind 12.07% is straightforward. Every worker is entitled to 5.6 weeks of statutory leave. That leaves 46.4 working weeks in the year (52 minus 5.6). Divide 5.6 by 46.4, multiply by 100, and you get 12.07%.
Worked example: Sarah works irregular hours at a cafe in Beverley. In June, she works 68 hours. Her accrued holiday for June is 12.07% of 68, which comes to 8.21 hours. Under the rounding rules that rounds down to 8 hours, because the leftover 0.21 of an hour is less than 30 minutes, and a fraction of 30 minutes or more would round up.
The entitlement builds up each pay period rather than being granted as a lump sum at the start of the year. That’s a significant operational change for employers who previously allocated the full 5.6 weeks upfront.
The 52 week reference period for holiday pay
Knowing how many hours of leave an employee has accrued is only half the equation. You also need to know what to pay them when they take it.
Holiday pay for irregular hours and part year workers is based on their average pay over the previous 52 paid weeks. You skip any weeks where the employee wasn’t paid (unpaid leave, lay off periods, gaps between assignments) and keep counting back until you have 52 weeks of actual paid data. Under the Working Time Regulations you cannot count any week falling before the 104 complete weeks preceding the first day of the holiday, so if you cannot reach 52 paid weeks in that window you use however many paid weeks you have.
For employees who haven’t been with you for 52 weeks yet, use however many complete paid weeks you have. A new starter with 14 weeks of pay data gets their average calculated across those 14 weeks.
The pay you include in the calculation isn’t just basic pay. Since January 2024, the regulations specify that ‘normal’ pay for the four week EU derived entitlement must include commission payments linked to tasks the worker is contractually obliged to carry out, payments related to professional status or seniority, and overtime that has been regularly paid during the reference period. For the irregular-hours and part-year workers covered by this guide, all statutory leave must be paid at the normal rate, subject to the applicable leave-year rules. The four-week normal-rate and 1.6-week basic-rate distinction applies to regular-hours workers, not this group.
If all of this sounds like a lot of number crunching, that’s because it is. Having a payroll provider who handles accurate holiday pay through outsourced payroll takes this entire calculation off your plate.
Rolled up holiday pay: now legal again
For years, rolled up holiday pay existed in a legal grey area. Employers used it, employment lawyers warned against it, and tribunals took inconsistent views. That changed in April 2024.
For leave years beginning on or after 1 April 2024, employers can lawfully use rolled up holiday pay for irregular hours and part year workers. Nobody else. If you have standard full time employees, rolled up holiday pay still doesn’t apply to them.
The calculation is simple: add 12.07% of the worker’s total pay in each pay period as a separate, clearly identified payment on their payslip. That last part is a legal requirement. The holiday pay must be shown as a separate line item. Bundling it invisibly into the hourly rate won’t satisfy the regulations.
Worked example: Tom is a casual labourer paid weekly. In one week, he earns £500 for the hours worked. His rolled up holiday pay is 12.07% of £500, which is £60.35. His payslip shows £500 earnings plus £60.35 holiday pay, totalling £560.35.
One thing to be aware of: rolled up holiday pay doesn’t remove the employer’s obligation to let workers take time off. You still need to make sure they actually take their 5.6 weeks. The payment method changes, but the entitlement to rest doesn’t.
What happens when a worker on rolled up holiday pay goes off sick?
If a worker receiving rolled up holiday pay goes off sick or takes statutory leave, the employer must continue paying them the average amount of holiday pay they received per pay period during the previous 52 weeks (or however long they’ve been employed, if less than 52 weeks). This prevents a gap in holiday pay accumulation during absences.
Regular hours workers: what hasn’t changed
If your employees work fixed, predictable hours every week, none of the above applies. Their holiday entitlement is still calculated in the standard way: 5.6 weeks of their normal weekly hours, paid at their normal rate. The 12.07% method and rolled up holiday pay are exclusively for irregular hours and part year workers.
The 52 week reference period does still apply to regular hours workers whose pay varies (someone on a fixed 40 hour week but with fluctuating overtime or commission, for example). Their entitlement is fixed but the pay rate for holiday needs to reflect their actual average earnings.
Common mistakes employers make with holiday pay
The biggest one we see is employers using the 12.07% accrual method for workers who don’t qualify. If someone works a fixed 20 hours every week, they’re not an irregular hours worker just because they’re part time. The second most common error is failing to include regular overtime in the holiday pay calculation. If your employee regularly works five hours of overtime a week and has done for months, that overtime forms part of their normal pay and must be included when calculating what they’re owed for holiday.
Other pitfalls include not showing rolled up holiday pay as a separate payslip line, using only 12 weeks of reference data instead of 52 (the 12 week period was replaced in April 2020), and failing to exclude unpaid weeks when calculating the reference period average.
Getting holiday pay wrong doesn’t just risk tribunal claims. It damages trust with employees and can lead to employment-tribunal claims. Employers must retain annual-leave records for six years. The Fair Work Agency is operational, with holiday-pay enforcement due in a later phase. For businesses across Hull, Beverley, and East Yorkshire, a specialist payroll bureau can calculate holiday pay using the worker information and rules covered by the agreed service. Check our competitive payroll pricing or get in touch with our team to find out how we can help.
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