Rolled-up holiday pay for UK employers: the 12.07% rules

Key takeaway: for leave years starting on or after 1 April 2024, you can pay holiday pay as a 12.07% uplift on every pay packet, but only to irregular-hours and part-year workers. It must appear as a separate amount on the payslip and the worker must still be able to take their leave. Rolling up holiday pay for regular-hours staff, including part-timers, is still not allowed and can leave you paying holiday twice.

Who counts as an irregular-hours or part-year worker

The Working Time (Amendment) Regulations 2023 added two definitions to the Working Time Regulations 1998. Both are tested for each leave year, using the terms of the worker's contract rather than the hours they happen to work:

Irregular-hours worker: the number of paid hours they will work in each pay period is, under their contract, wholly or mostly variable. Zero-hours and many casual or bank contracts fit this definition.
Part-year worker: under their contract they are required to work only part of the year, and there are periods of at least a week in that year when they are not required to work and are not paid. Term-time-only staff on permanent contracts are the classic example.

If a worker has more than one contract with you, you look at the contracts together when deciding whether their hours are mostly variable. Sick leave and statutory leave, such as maternity leave, are ignored when deciding whether someone is a part-year worker.

Why rolled-up holiday pay was banned, and why it is back

Rolled-up holiday pay means adding an amount for holiday to the worker's hourly rate instead of paying them when they take leave. In 2006 the Court of Justice of the European Union ruled in Robinson-Steele v RD Retail Services (C-131/04) that holiday pay had to be paid at the time leave was taken, so the practice became unlawful in the UK.

In Harpur Trust v Brazel, decided on 20 July 2022, the Supreme Court held that a part-year worker on a permanent contract was entitled to the full 5.6 weeks' leave without pro-rating. The school had used a 12.07% calculation and was told it had to use the statutory average week's pay instead, which left part-year staff with proportionally more holiday pay than full-time staff.

The Working Time (Amendment) Regulations 2023, in force from 1 January 2024, responded to both cases. For leave years beginning on or after 1 April 2024, irregular-hours and part-year workers now build up holiday at 12.07% of the hours they work, and employers may pay that holiday as a 12.07% uplift. A leave year that runs from 1 January is caught from 1 January 2025.

No rolled-up pay for regular-hours part-timers

A part-timer who works regular hours all year, for example 3 fixed days a week, is not an irregular-hours or part-year worker. They are entitled to 5.6 weeks' leave pro rata, which is 16.8 days for a 3-day week, paid at the time they take it. GOV.UK states that employers cannot include holiday pay in the hourly rate for regular-hours workers, whether full-time or part-time.

The double-payment risk comes from the 2023 rules themselves. Paying a 12.07% uplift only discharges your liability for holiday pay for leave earned under the new irregular-hours and part-year regime. If you roll up holiday pay for a regular-hours worker, those payments do not count as holiday pay, so the worker can still claim a full week's pay for each week of leave they take, and you end up paying for the same holiday twice.

How to pay rolled-up holiday pay correctly

Calculate 12.07% of all pay that counts towards a week's pay, not just basic pay. This includes overtime, commission linked to the job, and payments for seniority or professional qualifications. Bonuses do not usually count.
Pay it at the same time as the wages for the work it relates to, in every pay period.
Show it as a separate line on the payslip. The itemised pay statement must state the amount of holiday pay paid for that period. A combined rate that silently includes holiday is not compliant.
Put it in writing. The written statement of employment particulars must set out holiday and holiday pay terms precisely enough for the worker to calculate their entitlement, so state that holiday pay is rolled up at 12.07%.
Let workers take their leave. The worker still builds up leave and must be able to take it. Because the pay has already been made, the time off itself is unpaid when it is taken.
Keep records. From 6 April 2026 employers must keep records of annual leave and holiday pay for at least 6 years.

If a worker who was paid rolled-up holiday pay goes on sick leave or statutory leave, they keep building up holiday. You must pay them holiday pay each pay period during that leave, equal to the average rolled-up holiday pay they received per pay period over the previous 52 weeks, or a shorter period if they have been paid that way for less time.

Worked example at the April 2026 National Living Wage

Example: Sam is 24, on a zero-hours contract and paid weekly at the National Living Wage of £12.71 an hour from 1 April 2026. In week 1 Sam works 30 hours, so pay for work is 30 × £12.71 = £381.30 and rolled-up holiday pay is 12.07% of that, £46.02. In week 2 Sam works 18 hours and earns £40 commission, so pay for work is £228.78 + £40 = £268.78 and holiday pay is £32.44. The commission is included because it counts towards a week's pay. When Sam later takes a week off, there is no further holiday pay to pay, because it has already been paid.

Pay period	Pay for work	Holiday pay at 12.07%	Total
Week 1: 30 hours	£381.30	£46.02	£427.32
Week 2: 18 hours plus £40 commission	£268.78	£32.44	£301.22

The minimum wage applies to the pay for work, so the basic hourly rate must still be at least £12.71 before the uplift is added. See our guide to UK minimum wage rates for employers for the current rates by age.

The alternative: accruing leave at 12.07% of hours worked

You do not have to roll up holiday pay. Instead, irregular-hours and part-year workers build up leave on the last day of each pay period at 12.07% of the hours they worked, and you pay them when they take it. Leave is rounded to the nearest hour, with 30 minutes or more rounded up, and no worker can build up more than 28 days in a leave year.

Using Sam's figures, 30 hours in week 1 earns 3.621 hours of leave, rounded to 4 hours, and 18 hours in week 2 earns 2.17 hours, rounded to 2. When Sam takes that leave, it is paid at the normal rate, based on average pay over the previous 52 weeks in which Sam was paid, including commission and regular overtime. The accrual method keeps holiday pay tied to the time actually taken off, which helps workers rest, but it means more record-keeping and a larger calculation when leave is taken.

Official sources

Disclaimer: this article is general information, not legal, tax or employment advice. It reflects GOV.UK guidance and legislation as at 30 October 2026, and the rules and rates can change.