Holiday Pay Accrual Rates: How Holiday Builds Up

Holiday doesn't all appear on 1 January. It accrues (builds up) gradually as employees work through the year. Getting accrual calculations right is essential for starters, leavers, and irregular workers.

Standard Full-Time Accrual

28 Days Per Year

A full-time employee working 5 days per week is entitled to 5.6 weeks or 28 days of paid holiday per year (including bank holidays).

Monthly Accrual

Holiday accrues evenly across the year:

28 days ÷ 12 months = 2.33 days per month

Example: Employee starts 1 April. By 30 June (3 months), they've accrued:

2.33 × 3 = 7 days holiday

Weekly Accrual

You can also calculate weekly:

28 days ÷ 52 weeks = 0.54 days per week

Daily Accrual

For precise calculations:

28 days ÷ 365 days = 0.077 days per day

Less common but useful for very short employment periods.

Part-Time Accrual

Pro-Rata Calculation

Part-time employees get holiday pro-rated to their working pattern.

Formula:

(Days worked per week ÷ 5) × 28 = Annual entitlement

Then:

Annual entitlement ÷ 12 = Monthly accrual

Examples

3 days per week:

(3 ÷ 5) × 28 = 16.8 days per year
16.8 ÷ 12 = 1.4 days per month

2 days per week:

(2 ÷ 5) × 28 = 11.2 days per year
11.2 ÷ 12 = 0.93 days per month

4 days per week:

(4 ÷ 5) × 28 = 22.4 days per year
22.4 ÷ 12 = 1.87 days per month

The 12.07% Rule

For Irregular Hours and Part-Year Workers

Since April 2024, workers with irregular hours or who work only part of the year accrue holiday as a percentage of hours actually worked.

Rate: 12.07%

Where 12.07% Comes From

5.6 weeks' holiday ÷ 46.4 weeks worked = 12.07%

(52 weeks - 5.6 weeks holiday = 46.4 weeks worked)

How It Works

Formula:

Hours worked × 12.07% = Holiday hours accrued

Example 1: Worker does 100 hours in a month.

100 × 12.07% = 12.07 hours holiday accrued

Example 2: Worker does 40 hours one week, 15 hours the next.

Week 1: 40 × 12.07% = 4.83 hours accrued
Week 2: 15 × 12.07% = 1.81 hours accrued
Total: 6.64 hours accrued

Who This Applies To

• Zero-hours contract workers
• Casual workers with irregular patterns
• Agency workers
• Term-time workers
• Seasonal workers
• Anyone without a fixed hours pattern

Conversion to Days

If you report holiday in days rather than hours:

Holiday hours accrued ÷ Normal working day length = Days accrued

Example: Worker accrued 20 hours. Their normal working day is 8 hours.

20 ÷ 8 = 2.5 days holiday accrued

Accrual During the Year

When Accrual Starts

Accrual starts from the first day of employment.

Even during probation or induction, holiday is accruing.

Continuous Accrual

Holiday accrues constantly throughout the year, not in chunks.

Every day worked = holiday accruing.

Holiday Year

Your holiday year might be:

• Calendar year (Jan-Dec)
• Tax year (April-April)
• Company-specific year
• Rolling from employee's start date

Accrual works the same regardless, but it affects when entitlement "resets".

Accrual for New Starters

Mid-Year Starters

If someone starts mid-year, they accrue from their start date.

Example: Full-time employee (28 days entitlement) starts 1 September.

Remaining year: 4 months (Sept-Dec)

Accrued by year-end:

2.33 days/month × 4 months = 9.32 days

First Month

An employee starting on 15th of the month has accrued approximately half a month's holiday by month-end.

Example: Start date: 15 March Accrual by 31 March: ~1.17 days (half of 2.33)

Exact calculation depends on your policy (daily accrual gives most precision).

Accrual During Leave

Paid Annual Leave

Employees do accrue holiday while taking paid annual leave.

Example: Taking 2 weeks off? Holiday is still accruing during those 2 weeks.

Unpaid Leave

Generally, no accrual during unpaid leave.

Exception: If unpaid leave is short (e.g., 1-2 days), many employers don't reduce accrual. Check your policy.

Sick Leave

Yes, accrual continues during sick leave (whether paid SSP or unpaid).

This is an EU-derived right.

Maternity, Paternity, and Parental Leave

Yes, accrual continues during statutory maternity, paternity, adoption, and shared parental leave.

This includes unpaid portions of these leave types.

Other Statutory Leave

Accrual continues during:

• Jury service
• Time off for dependants
• Bereavement leave

Accrual During Notice Period

Notice Period Accrual

Employees continue accruing holiday during their notice period, whether:

• They're working their notice
• They're on garden leave (paid not to work)

When Accrual Stops

Accrual stops on the last day of employment.

Using Holiday During Notice

Employees can take holiday during notice if you agree.

Calculate entitlement: Add up accrual from start of holiday year to end of notice period.

Calculating at Termination

Formula

(Annual entitlement ÷ 12) × Months worked = Accrued holiday

Minus: Any holiday already taken.

Equals: Holiday to be paid out (or deducted if overdrawn).

Example 1: Leaver Owed Holiday

Employee (28 days entitlement) leaves 31 July (7 months worked).

Accrued:

(28 ÷ 12) × 7 = 16.33 days

Taken: 10 days

Owed: 6.33 days to be paid

Example 2: Overdrawn Holiday

Employee (28 days entitlement) leaves 30 April (4 months worked).

Accrued:

(28 ÷ 12) × 4 = 9.33 days

Taken: 12 days

Overdrawn: 2.67 days. Deduct pay for 2.67 days from final pay (if contract allows).

Accrual Caps

Can You Cap Accrual?

The statutory minimum cannot be capped. Employees must always accrue at least 5.6 weeks per year.

Contractual Leave Above Statutory

If your contract gives more than 5.6 weeks (e.g., 30 days), you can potentially cap the excess, but statutory 5.6 weeks cannot be capped or lost.

Use It or Lose It?

Statutory leave (5.6 weeks): Cannot be lost except in limited circumstances (e.g., worker failed to take despite encouragement).

Contractual leave (above 5.6 weeks): You can have "use it or lose it" rules if stated in contract.

Accrual and Carry-Over

Statutory Rules

Normally, holiday should be taken in the year it's due.

Exceptions allowing carry-over:

• Worker couldn't take leave due to sickness
• Worker couldn't take leave due to maternity/family leave
• Employer didn't allow or facilitate leave
• Furlough or COVID-related reasons (historical)

Contractual Carry-Over

Your contract may allow carry-over of a certain number of days (e.g., up to 5 days can carry to next year).

Only applies to leave above the 5.6-week statutory minimum (unless there's a statutory reason).

Public Holidays and Accrual

Bank Holidays

8 bank holidays in England/Wales. Your entitlement can include these or be in addition to them.

Common approach: 28 days total entitlement = 20 days + 8 bank holidays.

Accrual is the same whether bank holidays are separate or included.

Bank Holidays During Notice

If an employee's notice period includes bank holidays, they continue accruing entitlement.

If they work the bank holiday, they should be paid or given a day in lieu (depending on contract).

Accrual and Enhanced Contractual Leave

Above Statutory Minimum

Many contracts give more than 28 days (e.g., 30, 33, or 35 days including bank holidays).

Accrual formula remains the same:

Contractual entitlement ÷ 12 = Monthly accrual

Example: 33 days entitlement:

33 ÷ 12 = 2.75 days per month

Distinguish Statutory vs Enhanced

Keep track of which days are statutory (5.6 weeks) vs enhanced.

Why? Statutory days have stronger protections (can't be capped, must carry over in certain situations).

Common Mistakes

Mistake 1: Not Accruing from Day One

Wrong: "You get holiday after 3 months."

Right: Holiday accrues from day one, even during probation.

Mistake 2: Forgetting Part-Time Pro-Rata

Wrong: Giving part-time workers the same 28 days as full-time.

Right: Pro-rate based on working pattern.

Mistake 3: Stopping Accrual During Sick Leave

Wrong: Pausing accrual when someone is off sick.

Right: Accrual continues during sickness.

Mistake 4: Incorrect 12.07% Application

Wrong: Using 12.07% for workers with fixed hours.

Right: 12.07% is only for irregular hours and part-year workers.

Mistake 5: Deducting Overdrawn Holiday Without Contract Term

Wrong: Deducting pay for overdrawn holiday without a contract clause allowing it.

Right: Check contract permits deductions before withholding final pay.

Record Keeping

What to Track

For each employee:

• Holiday year start date
• Annual entitlement
• Days/hours accrued to date
• Days/hours taken to date
• Days/hours remaining

Software

Modern HR/payroll systems track accrual automatically.

Ensure correct settings for:

• Full-time vs part-time
• Fixed hours vs 12.07% accrual
• Carry-over rules

Accrual During Long-Term Absence

Long-Term Sick Leave

Holiday continues accruing. Some employees return from long-term sick leave with substantial accrued holiday.

Options:

• Allow them to take it
• Pay it out if they leave
• Allow carry-over into next year

Cannot: Force them to forfeit statutory entitlement.

Maternity Leave

Employees on 12 months' maternity leave accrue a full year's holiday.

Common approach: Take accrued leave at end of maternity before returning, or upon leaving.

Advanced Accrual Scenarios

Scenario 1: Changing Hours Mid-Year

Employee works full-time for 6 months (accrues 14 days), then reduces to 3 days/week.

Accrual for remaining 6 months:

(3 ÷ 5) × 28 ÷ 2 = 8.4 days

Total year: 14 + 8.4 = 22.4 days

Scenario 2: Switching from Fixed to Variable Hours

Employee moves from fixed hours (monthly accrual) to zero-hours (12.07%).

From switch date: Apply 12.07% to hours worked going forward.

Scenario 3: TUPE Transfer

Holiday accrual is continuous across TUPE transfers. The new employer inherits accrued holiday obligations.

Accrual FAQs

Q: Can I require employees to take holiday during quiet periods?

A: Yes, with proper notice (usually double the holiday length). But they must still accrue the full entitlement across the year.

Q: What if someone never requests holiday?

A: You should encourage them to take it. If the year ends and statutory leave hasn't been taken, it may carry over (if you failed to facilitate it).

Q: Can I pay in lieu of holiday instead of giving time off?

A: No, except at termination of employment. Holiday must be taken during employment.

Practical Tips

Tip 1: Automate Accrual

Use software to track accrual automatically. Manual tracking creates errors.

Tip 2: Clear Communication

Explain to new starters how accrual works so they understand their entitlement.

Tip 3: Monthly Review

Check accrued vs taken every month to spot patterns (e.g., someone not taking leave).

Tip 4: Leaver Process

Have a clear process to calculate accrued holiday at termination and process payment/deduction correctly.

Key Takeaways

• Full-time: 2.33 days per month (28 days/year)
• Part-time: Pro-rata based on working pattern
• Irregular hours: 12.07% of hours worked
• Accrual continues: During paid and unpaid statutory leave
• Stops: Only on the last day of employment
• Must be tracked accurately: To avoid under/overpayment at termination