What is rolled-up holiday pay and is it legal in 2026?

Full answer

Rolled-up holiday pay means your employer pays your statutory holiday entitlement as a permanent uplift on every hour worked, rather than paying you while you are actually on leave. The standard uplift is 12.07%, which reflects the 5.6 weeks of statutory annual leave as a proportion of the 46.4 working weeks in a year (5.6 / 46.4 = 12.07%). So a worker on GBP 12.71 per hour (the 2026/27 National Living Wage for age 21+) would receive roughly GBP 1.53 extra per hour, taking the effective rate to about GBP 14.24. Who it affects: this method is permitted for irregular-hours workers and part-year workers (for leave years beginning on or after 1 April 2024). For staff on fixed, regular hours it is generally not the correct approach -- their holiday pay should be based on normal weekly pay when leave is taken. Agency staff, zero-hours and seasonal workers are the typical group who see it. Key 2026/27 rules: the uplift must be calculated on total earnings in the pay period (including overtime and commission where these form part of normal pay), it must be paid at the same time as the work is done, and crucially it must be shown as a separate, identifiable line on the payslip. An employer cannot simply say the headline rate 'includes holiday'. The worker still has the legal right to actually take the 5.6 weeks off, even though it has already been paid. For tax, rolled-up holiday pay is ordinary earnings -- it is subject to PAYE income tax and Class 1 National Insurance in the period it is paid. There is no special treatment. Use a take-home pay calculator to see the net effect of the uplifted hourly rate, and check gov.uk guidance on holiday entitlement for the precise reference-period rules for variable pay.

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