Paid holiday

What is a paid holiday?

A paid holiday is time off work that an employee can take while still receiving their normal pay. In the UK, paid holidays usually form part of an employee's annual leave entitlement and may include bank holidays, depending on the employment contract.  

Paid holidays give employees time to rest, recharge, and return to work feeling refreshed.

How does paid holiday work in the UK?

In the UK, almost all workers are legally entitled to 5.6 weeks of paid holiday each year under the Working Time Regulations. For someone working five days a week, that works out to 28 days of paid holiday, which can include bank holidays if the employer chooses.  

Key points for employers:

• Full-time employees working five days a week are entitled to 28 days' paid holiday per year.  

• Part-time employees receive the same 5.6 weeks of holiday entitlement, calculated on a pro-rata basis according to the days or hours they work.  

• Holiday entitlement starts building up from an employee's first day of employment.  

• There is no automatic legal right to have bank holidays off. Employers can include bank holidays within the statutory 28-day entitlement or offer them as additional leave.  

• Employees should receive their normal holiday pay when taking annual leave.  

Many UK businesses choose to offer more than the statutory minimum as part of their employee benefits package, but they cannot offer less than the legal entitlement.

What is included in paid holiday entitlement?

A paid holiday entitlement is more than just time away from work. It covers both the amount of leave an employee can take and the pay they receive while on holiday.

It may include:

• Statutory annual leave entitlement (5.6 weeks per year for most workers)  

• Holiday pay based on an employee's normal earnings  

• Bank holidays or public holidays, depending on the employment contract  

• Additional paid leave offered by the employer  

• Carry-over provisions for unused leave, where permitted  

The exact entitlement should be clearly set out in the employee handbook or paid holiday policy.

How do paid holidays benefit businesses?

Paid holidays can deliver real benefits for employers, not just employees.

They help businesses:

• Reduce employee burnout and stress  

• Improve productivity and performance  

• Boost morale and job satisfaction  

• Increase staff retention  

• Support recruitment efforts  

• Reduce disputes around holiday entitlement and pay  

• Maintain compliance with UK employment law  

This matters because employee wellbeing has a direct impact on business performance. According to the CIPD's Health and Wellbeing at Work report, employees who feel work negatively affects their mental health are more than twice as likely to consider leaving their employer. Giving employees the chance to switch off through paid holidays can help create a healthier, more engaged workforce.

How is holiday pay calculated?

Holiday pay should reflect an employee's normal pay while they are on leave. How it is calculated depends on how the employee is paid.

For salaried employees

Employees with fixed hours and a fixed salary usually receive their normal weekly or monthly pay during holiday periods.

Example:

• Annual salary: £36,000  

• Monthly salary: £3,000  

If the employee takes one week of annual leave, they continue to receive their normal salary.

For hourly employees

Employees with variable hours or pay should receive holiday pay based on their average earnings over the previous 52 paid weeks.

Example:

• Average weekly earnings over 52 paid weeks: £500  

• One week of holiday taken  

Holiday pay due: £500

When calculating holiday pay for hourly employees, employers may also need to include regular overtime, commission, and certain allowances if they form part of normal pay.

Paid holiday vs holiday pay

One refers to the time off, while the other refers to the money an employee receives during that time.

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Common mistakes employers make with paid holidays

Even well-intentioned employers can get caught out by holiday rules. Common mistakes include:

• Miscalculating holiday entitlement for part-time workers  

• Incorrectly calculating holiday pay for hourly employees  

• Assuming bank holidays are separate from statutory leave  

• Failing to keep accurate holiday records  

• Having an unclear paid holiday policy

FAQs

1. Is paid holiday a legal requirement in the UK?

Yes. Most workers in the UK are legally entitled to 5.6 weeks of paid holiday each year. Employers cannot provide less than the statutory minimum holiday entitlement.

2. Do bank holidays have to be paid?

Not always. There is no legal requirement to give employees paid time off on bank holidays. Whether bank holidays are paid depends on the employment contract and holiday policy.

3. Do part-time employees get paid holidays?

Yes. Part-time employees are entitled to paid holidays just like full-time employees. Their holiday entitlement is calculated on a pro-rata basis according to the hours or days they work.

4. Can employees carry unused holiday into the next year?

Sometimes. Employers may allow holiday carry-over through their paid holiday policy. In certain circumstances, such as long-term sickness or family leave, employees may have a legal right to carry leave forward.