Definition
A method of paying holiday entitlement where an additional percentage is added to each pay period to cover holiday pay, rather than paying the worker separately when they take time off.
UK Context
Rolled-up holiday pay was legalised for irregular hours workers and part-year workers from 1 January 2024 under the Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023. It must be shown as a separate line on the payslip. The rate is 12.07% of pay for statutory holiday entitlement. It does not apply to regular hours workers on permanent contracts, who must still be paid when taking leave.
Best Practices
- Only use rolled-up holiday pay for irregular hours workers and part-year workers as permitted by law
- Show the holiday pay element as a separate, clearly labelled line on every payslip
- Continue to track holiday taken and encourage workers to use their entitlement
- Use the 12.07% calculation for statutory holiday and adjust if offering enhanced entitlement
- Ensure payroll software correctly calculates and displays rolled-up holiday pay
Frequently Asked Questions
Is rolled-up holiday pay legal in the UK?
Yes, since 1 January 2024, rolled-up holiday pay is legal for irregular hours workers and part-year workers under the Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023. It is not permitted for regular hours workers on standard contracts, who must be paid in the normal way when taking holiday.
How is rolled-up holiday pay calculated?
The standard calculation is 12.07% of the worker's pay in each pay period, which represents 5.6 weeks of statutory holiday entitlement divided by 46.4 working weeks. This percentage is applied to the worker's gross pay and shown as a separate line on the payslip.
Do workers still get time off with rolled-up holiday pay?
Yes, rolled-up holiday pay changes when the payment is made, not whether the worker is entitled to time off. Workers retain their right to 5.6 weeks of annual leave and should be encouraged to take it. The difference is that they have already received the pay for that leave in their regular pay packets.