Rolled-Up Holiday Pay for Irregular Hours Workers 2026

What Is Rolled-Up Holiday Pay?

Rolled-up holiday pay is a method of paying holiday pay where the value of a worker's statutory annual leave is added to their normal pay in every pay period — typically as an extra percentage on top of their hourly rate — rather than being paid out separately when the worker actually takes time off. In effect, holiday pay is built into ordinary wages as it is earned, so the worker is paid something towards their holiday entitlement with every payslip, whether or not they take leave in that period.

For many years this approach was generally unlawful across the board, following case law commonly referred to as the Robinson-Steele rule, which required holiday pay to be paid at the time leave was actually taken so that workers were not deterred from taking it. From holiday years beginning on or after 1 April 2024, that position was reversed for a specific, narrowly defined category of workers, making rolled-up holiday pay a lawful option again — but only for them.

Who It Applies To

Rolled-up holiday pay is only lawful for two categories of worker created by the 2023 amendments to the Working Time Regulations: irregular hours workers and part-year workers. It is not available for workers with regular, fixed hours, including most salaried employees, regardless of how their employer might prefer to structure pay.

• Irregular hours worker: someone whose paid hours in each pay period are, under their contract, wholly or mostly variable
• Part-year worker: someone who, under their contract, is required to work only part of the year, with periods of at least a week within that year where they are not required to work and are not paid
• Workers with fixed or predominantly fixed hours do not fall into either category, even if their hours occasionally change

For everyone else — workers with regular, fixed hours — rolled-up holiday pay remains unlawful. Their holiday pay must still be paid at the time leave is actually taken, calculated using the standard average pay method over a 52-week reference period.

The 12.07% Calculation

Where rolled-up holiday pay is used, the standard rate is 12.07% of the worker's pay for the hours actually worked in that pay period. This figure is derived directly from the statutory minimum holiday entitlement of 5.6 weeks a year: a year has 52 weeks, so subtracting 5.6 weeks of leave leaves 46.4 weeks in which the worker is actually working. Dividing the 5.6 weeks of leave by the 46.4 weeks worked gives approximately 0.1207, or 12.07%.

Applying 12.07% to pay for hours worked approximates the value of 5.6 weeks of paid annual leave spread evenly across the working weeks of the year, so that a worker with genuinely variable hours still builds up an equivalent benefit to someone with a fixed pattern of work and a fixed annual leave allowance.

Payslip Requirements

Employers using rolled-up holiday pay must show it as a clearly identified, separate line item on the worker's payslip for each pay period. It is not sufficient to simply increase basic pay or fold the additional amount invisibly into a single combined figure — the holiday pay element must be visible and distinguishable, so both the worker and any enforcement body checking compliance can see exactly what has been paid for holiday entitlement.

As an alternative to paying rolled-up holiday pay in cash, employers may instead use the 12.07% figure to calculate leave accrual in hours for each pay period, rounding up to the nearest hour once accrued leave reaches half an hour or more. The worker then takes that accrued leave as paid time off in the usual way, rather than receiving an ongoing cash addition to their pay.

From 6 April 2026, employers must also keep records of annual leave and holiday pay, including any leave carried over between leave years, as part of wider record-keeping reforms designed to make it easier to verify that irregular hours and part-year workers are receiving the correct entitlement.

Worked Example

Priya works as a bank care assistant on a genuinely variable-hours contract, picking up different shifts each week depending on demand — she is an irregular hours worker under the Working Time Regulations. In one pay period she works 80 hours at £13.50 an hour, earning £1,080 in basic pay for that period.

Her employer applies rolled-up holiday pay at 12.07%: £1,080 × 12.07% = £130.36. Priya's payslip shows £1,080 in basic pay and a separately identified £130.36 rolled-up holiday pay line, giving total pay of £1,210.36 for that period. She does not receive a further separate payment when she later books time off, because the value of her holiday has already been paid to her as she earned it.

If Priya's employer had instead worked regular, fixed hours each week, this method would not be available — her holiday pay would need to be calculated on her average pay over a 52-week reference period and paid out only when she actually took leave.

Common Pitfalls

• Applying rolled-up holiday pay to fixed-hours staff. The method is only lawful for irregular hours workers and part-year workers as defined in the Working Time Regulations — using it for regular, fixed-hours or salaried staff is not compliant.
• Hiding holiday pay inside basic pay. Rolled-up holiday pay must appear as its own clearly identified line on the payslip; simply increasing the hourly rate without showing the holiday pay element separately does not meet the requirement.
• Misclassifying who is a part-year worker. A part-year worker must have contractual periods of at least a week where they are not required to work and are not paid — staff who simply work fewer hours in quiet periods, without a genuine unpaid gap, do not automatically qualify.
• Forgetting the new record-keeping duty. From 6 April 2026, employers must keep records of annual leave, holiday pay, and any carried-over leave — treating this as optional risks non-compliance when checked.