Small Business Accountants

How to calculate holiday pay for overtime and commission payments

UK employees receive 5.6 weeks of statutory paid holiday per year, equivalent to 28 days for a full-time worker on a five-day week. Holiday pay must reflect normal weekly earnings using a 52-week reference period, and must include regular overtime, commission, and performance-linked bonuses. Irregular-hours and part-year workers accrue leave at 12.07% of hours worked per pay period under rules that took effect on 1 April 2024.

By Jordan Macey MAAT Reviewed by Noor Fiaz Updated 16 Apr 2026 3

Key takeaways

UK employees are entitled to 5.6 weeks of paid statutory holiday per year, equal to 28 days for a full-time worker on a five-day week, including bank holidays if the employer chooses.
Holiday pay must be based on a worker's normal weekly pay, calculated as the average over the previous 52 paid weeks, with up to 104 weeks looked back to find 52 paid weeks.
Regular voluntary overtime, non-guaranteed overtime, commission, and performance-linked bonuses must all be included in the calculation of holiday pay.
Irregular-hours and part-year workers accrue leave at 12.07% of hours worked in each pay period under new rules for leave years starting on or after 1 April 2024.
Employers cannot pay in lieu of statutory holiday except when employment ends; workers must be given time off to take the legal minimum 5.6 weeks each year.

What are the rules around holiday pay?

"What are the rules around holiday pay?" is a common question often asked by employers. It can be confusing, as regulatory changes mean that employers now need to consider additional elements when working out an employee's holiday pay.Simply put, employers now need to include regular commission and regular overtime payments when calculating an employee's or worker's holiday pay. This is explained in further detail below:

How should holiday pay be calculated?

Holiday pay reference period

Under the UK Working Time Regulations 1998, almost all workers are entitled a minimum of 5.6 weeks of holiday leave per annum (which can include public holidays).

Workers who are entitled to this include:

Employees and workers with regular and irregular hours
Employees and workers on zero-hours contracts
Agency workers ‍

April 2020 changes to calculating holiday pay:

Prior to April 2020, staff with working hours that vary have their leave calculated based on a reference period of 12 weeks. With effect from 6th April 2020, the holiday pay for workers with variable hours will be calculated based on the average they've earned over 52 weeks.

The period refers to the last 52 weeks in which the staff has worked and received pay. Weeks whereby the worker hasn’t received pay won’t be counted towards the 52-week reference period.

If the worker is employed for less than 52 weeks, the holiday pay reference period should then include as many whole weeks of pay as is available. For example, if a worker has been employed for 30 full weeks, his or her holiday pay should be calculated based on the average pay received during those weeks.

What should holiday pay include?

Regular voluntary overtime:

Regular voluntary overtime refers to overtime work that an employee isn't required to perform, but can accept.

According to the Employment Appeal Tribunal (EAT), employers need to include regular voluntary overtime payments when calculating the holiday pay of their employees.

This applies only to the first four weeks of holiday pay (these four weeks of annual leave are a requirement set by the EU Working Time Directive). Under the UK law, workers are granted an additional 1.6 weeks' holiday, and this period doesn't have to include voluntary overtime.

Normal non-guaranteed overtime:

Normal non-guaranteed overtime refers to overtime work that an employer isn't obliged to offer, but employees are contractually obliged to work when it is offered.

Employers are required to include normal non-guaranteed overtime payments for the first four weeks' holiday pay.

Other components holiday pay should include:

Bonus payments: If an employee is regularly paid bonuses, these payments must be included in at least four weeks of their paid holiday.
Commission payments: If an employee's pay usually includes contractual, results-based commission, this must be provided in at least four weeks' of his or her paid holiday.
Travelling time allowances

Note: While some employers may decide to include overtime, commission and bonus payments in a worker’s full 5.6 weeks’ paid holiday, this isn’t mandatory as the law on these payments is based on the EU Working Time Directive, which indicates the right to a minimum of four weeks of paid holiday a year.

Frequently asked questions

How many days of paid holiday are UK employees entitled to?

UK employees working a standard five-day week are entitled to 5.6 weeks of paid statutory holiday per leave year, which works out to 28 days. Part-time workers get 5.6 weeks of their normal working days, pro-rated. Employers can include bank holidays within the 5.6 weeks or grant them on top. Employment contracts can offer more than the statutory minimum, but never less. Holiday cannot be carried forward as cash except when employment ends.

What must be included when calculating holiday pay?

Holiday pay must reflect a worker's normal weekly pay. That includes regular voluntary overtime that is worked with sufficient regularity to be classed as normal, non-guaranteed overtime the worker is obliged to accept if offered, commission paid on performance, and any bonus directly linked to the work performed. Allowances that are not a reward for work, such as occasional expense reimbursements, are excluded from the holiday pay calculation.

What is the 52-week reference period for holiday pay?

When pay varies week to week, holiday pay is based on the average weekly earnings over the 52 paid weeks immediately before the holiday starts. Employers look back up to 104 weeks to find 52 weeks in which the worker was paid, ignoring weeks with no pay. This 52-week period replaced the previous 12-week reference period in April 2020 and applies to all workers whose pay varies because of overtime, commission, or irregular hours.

What are the 2024 holiday pay changes for irregular-hours workers?

For leave years starting on or after 1 April 2024, UK law introduces a separate holiday accrual system for irregular-hours and part-year workers. These workers accrue leave at 12.07% of the hours worked in each pay period. Employers can also pay rolled-up holiday pay to these workers at the same 12.07% uplift on hours worked, which is shown separately on the payslip. The 5.6-week entitlement still applies to regular workers.

Can an employee be paid in lieu of holiday?

During employment, workers cannot be paid in lieu of the legal minimum 5.6 weeks' holiday. They must actually take that time off. Employers can pay in lieu of any contractual holiday that exceeds the statutory minimum if the contract allows. When employment ends, the employer must pay the worker for any accrued but untaken statutory and contractual holiday, calculated at normal weekly pay using the 52-week average.

Do workers build up holiday entitlement while on sick leave?

Yes. UK workers continue to accrue statutory paid holiday at the normal 5.6-week rate throughout sick leave, including long-term absences. If they cannot take the accrued holiday before the leave year ends because of sickness, they can usually carry it forward and take it within 18 months of the end of the leave year. Employers should support workers in taking holiday rather than letting large balances build up.

How do I calculate holiday pay for a worker on commission?

For commission-earning workers, calculate the average weekly pay over the 52 paid weeks ending the week before the holiday. Add up total pay including basic salary, commission, bonuses linked to performance, and regular or non-guaranteed overtime, then divide by 52. Pay that figure per holiday week. Commission earned must be included even if it is paid in a different pattern from salary, because European case law confirmed that holiday pay cannot rely on basic pay alone.