Holiday pay

Holiday entitlement and holiday pay are different

Annual leave is the time a worker can take away from work. Holiday pay is what they should receive while taking that leave. The two calculations use some of the same facts, but they answer different questions.

Start by identifying the worker's statutory and contractual leave. Then check how the leave being taken should be paid. In Great Britain, some statutory leave must reflect normal pay, which can include regular payments linked to the job. Other statutory leave can be paid at basic pay. The current GOV.UK holiday-pay guidance explains the distinction.

What can count as normal pay?

Normal pay is not always the figure beside “basic salary” in the contract. Regular overtime, commission or other payments connected to doing the work may need to be included. Whether a payment counts depends on its character and how regularly it is made.

Avoid blanket rules such as “all overtime counts” or “bonuses never count”. Give payroll the worker's pay history and enough context to identify recurring work-related payments.

Keep the evidence behind the payment

Record which leave pot was used, the worker's working pattern, the earnings included and the period used for any average. Keep that calculation with the leave and payroll record.

Great Britain and Northern Ireland do not use the same averaging rules when pay varies. Use the relevant national guidance rather than copying a method from another worker or jurisdiction. A calculation that can be followed later is easier to correct than a payroll figure with no working behind it.