UK Statutory Leave | How to Process This Through Payroll

Key Highlights

• All workers in the UK—including part-time, shift-based, and zero-hours employees—are entitled to 5.6 weeks of paid annual leave. Accurate leave calculations are essential, especially for non-standard work patterns, using methods such as 12.07% of hours worked for irregular schedules.

• Holiday pay must include regular salary, overtime, commission, and bonuses. For variable pay workers, the average earnings over the past 52 weeks must be used, ensuring fair compensation during time off and avoiding compliance risks.

• Employers must maintain accurate records, issue itemized payslips, and ensure proper leave accrual during absences (like sick leave or parental leave). Mistakes in holiday management or payroll processing can lead to disputes, penalties, and reputational damage.

As the modern workplace evolves further with flexible hours, part-time work, and blended work arrangements, statutory holiday leave ranks among the most significant rights of UK employees. Not only does it boost work-life balance, but it is also an obligatory requirement for all UK employers. Non-compliance with holiday entitlement legislation can attract severe legal and financial consequences.

This guide outlines everything employers and employees need to know about statutory holiday entitlements in the UK for 2025, including how much leave workers are entitled to, how it's calculated, how pay is managed, and what rules apply for carrying and managing leaves forward or handling it during absences.

Statutory Holiday Entitlement: An Overview

Under UK employment law, most workers are entitled to 5.6 weeks’ paid annual leave per year. This includes:

• Workers with variable or shift-based schedules
• Full-time and part-time employees
• Temporary and agency workers
• Casual and zero-hours workforce

However, employers are not legally obligated to offer UK public holidays (bank holidays) as additional paid leave, although they are free to include them in this entitlement.

Leave Entitlement for Different Work Patterns

A standard full-time employee working five days a week is entitled to:

• 5.6 weeks × 5 days = 28 days of paid annual leave per year

This is the maximum statutory entitlement under UK law. Any additional days are considered contractual and subject to employer discretion.

ii) Part-Time Workers

Part-time workers are also entitled to 5.6 weeks of paid leave, but the total number of days will vary based on how many days per week they work.

Example: A worker who works three days per week is entitled to:

• 5.6 weeks × 3 days = 16.8 days of annual leave

Employers should round this up to the nearest half or whole day in practice, ensuring clarity and fairness.

iii) Workers with Irregular Hours

For workers with no fixed schedule, holiday entitlement is typically calculated based on the hours they work. A common method is:

• 12.07% of hours worked

After holidays, this percentage is calculated by dividing 5.6 weeks by the number of weeks left in a year (46.4). Calculations should be based on actual hours worked during a representative reference period, according to employers.

Holiday Pay: How It’s Calculated

Employees must receive their normal pay when taking statutory annual leave. This includes:

• Basic salary
• Regular overtime
• Commission
• Bonuses (if regularly earned)

Employees continue to accrue statutory holiday while on:
• Sick leave
• Maternity, paternity, and adoption leave
• Shared parental leave
• Furlough (when applicable)

If an employee is unable to take their holiday in the current leave year due to one of these reasons, they can carry it over to the following year.

ii) Carrying Over Unused Holiday

While the law encourages employees to take their holiday in the year it is earned, there are specific circumstances under which unused leave may be carried over.

iii) Standard Carry-Over Rules

• Employees can carry over up to 8 days of their 28-day entitlement with employer agreement.
• Additional leave (beyond 28 days) offered as a contractual benefit can also be carried over if the employer allows.

If an employee was unable to take leave due to long-term sickness or statutory leave, the unused portion can be carried over for up to 18 months.

Bank Holidays: Are They Included?

Employers are not required by UK law to offer paid leave on bank holidays. Depending on the employment contract, these may be offered as extra days or included in the 5.6 weeks required by law.

For example:

• An employee entitled to 28 days leave, inclusive of bank holidays, will have to use part of that entitlement on days the business is closed for public holidays.

Clarity in contracts and policies is essential to avoid misunderstandings.

Managing Leave Requests and Restrictions

While employees can request time off, employers have the right to:
• Refuse leave requests for operational reasons
• Restrict when leave can be taken (e.g., peak periods)
• Require leave to be taken during shutdowns (e.g., Christmas)

Employers must give notice equal to twice the length of the leave being enforced. For example, if requiring employees to take five days of holiday, ten days’ notice must be given.

Rolled-Up Holiday Pay: A Warning

Historically, some employers used "rolled-up" holiday pay for workers with irregular hours by including a portion of holiday pay in each payslip. This practice is now strongly discouraged and may be unlawful unless specific exemptions apply.

Instead, employers should ensure holiday pay is paid when leave is taken and recorded separately for transparency.

Final Payments and Leave on Termination

When an employee leaves the company, they must be paid for any unused statutory holiday they have accrued but not taken. The payment should be calculated in line with their:

•Working pattern
• Leave year cycle
• Contractual entitlement (where applicable)

Post-COVID Rules: What Changed?

While the COVID-19 pandemic was ongoing, temporary emergency legislation permitted workers to carry over up to four weeks' unused statutory leave to the following two years. As of 2025, these provisions have expired, and the standard carry-over provisions apply.

Payroll Compliance Considerations

Correct management of annual leave is paramount for UK payroll compliance. Employers should:

Maintain accurate and clear records of annual leave taken and leave accrued.
• Correctly calculate holiday pay and provide itemized payslips.
• Updated payroll management system in circumstance of hours change or entitlement change.
• Minimize discrepancies with employees who work varied patterns or are subject to contract change.

In the UK, statutory annual leave is legally enforceable, it is not just a right, but it is a right that protects the worker and supports wellbeing. For employers, managing holiday entitlement in the correct way is key to avoiding compliance risks and protecting the employee experience.

There are many things to consider in the process, such as bank holidays, irregular working hours, average pay, carryover etc. It’s important for employers to consider every scenario and in doing so, ensure that employees are aware of and can access their statutory entitlements. This requires consistency and transparency of process and staying on top of legal changes.

Partner with TopSource Worldwide

Temporary emergency legislation during the COVID-19 emergency allowed workers to carry over up to four weeks of unused statutory leave into the next two leave years. As of 2025, these provisions are no longer in effect and normal carry-over provisions apply.

We help you:

• Accurately calculate leave entitlements
• Automate complex payroll processes
• Manage leave across multiple jurisdictions
• Stay compliant with evolving legislation

Let our expertise support your success in 2025 and beyond. Contact TopSource Worldwide to streamline your payroll and leave management today.