Holiday Pay for Trade Businesses — Calculating Leave for Employees and Subcontractors (2026)

The Statutory Minimum: 5.6 Weeks

Every worker and employee in the UK is legally entitled to a minimum of 5.6 weeks of paid holiday a year under the Working Time Regulations 1998. For someone working a standard five-day week, that works out to 28 days (5.6 × 5). This is the floor — you can offer more in a contract, but you cannot offer less.

A common point of confusion: the 28 days can include the eight UK bank holidays. There is no separate legal right to bank holidays off on top of the 5.6 weeks. So if you give a full-time operative the eight bank holidays plus 20 days' annual leave, you have met the minimum exactly. Many trade firms work bank holidays anyway, in which case those days simply count toward the 28-day pot and the operative takes them at another time.

Note there is also a statutory cap: the 5.6 weeks is the maximum you are legally required to give, but for a worker doing a six-day week the entitlement caps at 28 days, not 33.6 — the law caps statutory leave at 28 days regardless of how many days a week the person works.

Part-Time Workers: Pro-Rata

Part-timers get the same 5.6 weeks, just scaled to their working pattern. The principle is simple: multiply the number of days they work each week by 5.6.

• Works 3 days a week: 3 × 5.6 = 16.8 days of paid holiday a year
• Works 4 days a week: 4 × 5.6 = 22.4 days
• Works 2.5 days a week: 2.5 × 5.6 = 14 days

You cannot round these figures down — rounding up is fine, rounding down short-changes the worker. A part-time labourer working three fixed days a week is entitled to their 16.8 days even if that produces an awkward fraction. The fraction matters because it is paid leave; underpaying it is an unlawful deduction from wages.

Irregular-Hours and Part-Year Workers: The 12.07% Method

This is where trade businesses most often work in the real world. Casual labourers, operatives on zero-hours arrangements, workers paid by the shift, and seasonal staff who only work part of the year don't fit the neat "days per week" model. The 2024 reforms (for leave years starting on or after 1 April 2024) introduced a specific accrual method for these workers.

For irregular-hours and part-year workers, holiday accrues at 12.07% of the hours actually worked in each pay period. The 12.07% figure is not arbitrary — it is 5.6 weeks expressed as a proportion of the working year: 5.6 ÷ (52 − 5.6) = 0.1207. In plain terms, for every hour worked, the person banks roughly seven minutes of paid holiday.

The reforms confirmed that this group can accrue leave this way and — importantly — that employers can pay it as rolled-up holiday pay rather than having to track an accrued balance manually. Before April 2024, rolled-up holiday pay was technically unlawful following older case law, so this was a genuine change that simplified life for trade firms using casual labour.

Rolled-Up Holiday Pay Explained

Rolled-up holiday pay means you pay an extra amount on top of each payslip instead of paying the person separately when they actually take time off. For an irregular-hours operative, you add 12.07% to their pay for the hours worked in that period, and that uplift represents their holiday pay.

Two conditions matter if you use it:

• It must be a clear, separate, itemised line on the payslip. You cannot bury it in the hourly rate or claim retrospectively that part of the wage "included" holiday. The uplift has to be visibly identified as holiday pay.
• It only applies to irregular-hours and part-year workers. For regular full-time or fixed part-time staff, rolled-up holiday pay is still not permitted — you pay them their normal wage while they are actually on leave.

One practical caution: rolled-up pay means the worker gets the money continuously but still needs to actually take rest. The right to paid leave exists for health and safety reasons, so you should still allow and encourage these workers to take time off even though they have already been paid for it.

What Counts as a "Week's Pay"

Holiday pay is not just basic hourly rate × hours. A long line of case law (Bear Scotland, Lock v British Gas, and subsequent rulings) established that holiday pay must reflect normal remuneration — what the worker usually earns when working. For tradespeople this matters a great deal, because so much trade pay is variable.

A "week's pay" for holiday purposes must include:

• Regular overtime — including voluntary overtime if it is worked with sufficient regularity to count as part of normal pay.
• Commission and performance bonuses linked to the work itself, such as a bonus per job completed or a results-based commission.
• Certain allowances and shift premiums that are intrinsically linked to the performance of the role (for example a regular travel-time or productivity allowance).

Where pay varies, you average it using a 52-week reference period: take the average weekly pay over the previous 52 weeks in which the worker earned something (ignoring any weeks with no pay, going back up to 104 weeks to find 52 paid weeks). That average becomes the value of a week's holiday. Paying only the basic rate while ignoring regular overtime and commission is one of the most common — and most expensive — errors, because it can generate years of underpayment claims.

When Holiday Is Paid and Carry-Over Rules

For staff on fixed hours, holiday is paid at the time the leave is taken, at the rate of a normal week's pay. You can set notice requirements for booking leave (typically at least twice the length of the holiday requested as notice) and you can require leave to be taken at certain times, such as a Christmas shutdown, provided you give adequate notice.

On carry-over: the four weeks of leave derived from EU law generally must be used within the leave year, but the additional 1.6 weeks can be carried forward by agreement. Workers who could not take leave because of sickness or statutory family leave (maternity, paternity, shared parental) are allowed to carry it over. If a worker leaves part-way through the year, you pay them for any accrued-but-untaken holiday in their final pay — and conversely, if they have taken more than they accrued, you may be able to recover it if the contract permits.

The Big Warning: Subcontractors Get No Holiday Pay — Unless They're Really Workers

Everything above applies only to employees and workers. A genuinely self-employed subcontractor — someone running their own business, sending invoices, free to send a substitute, working for multiple clients and carrying their own risk — gets no holiday pay at all. They price their own time off into their day rate. That is the whole basis of the arrangement.

The danger is mislabelling. If you treat someone as a self-employed subbie but in practice they work set hours for you, use your tools and van, cannot send a substitute and effectively work only for you, an employment tribunal may rule they are a worker regardless of what the paperwork says. This is the false self-employment problem, and the consequences are serious: a successful worker-status claim can trigger backdated holiday pay stretching back years, on top of the employment status and tax exposure (CIS versus PAYE) that comes with it.

The landmark cases here — Pimlico Plumbers and Uber among them — both involved people the business insisted were self-employed but who tribunals found were workers entitled to holiday pay. Trade is a high-risk sector for this precisely because the "labour-only subbie" model is so common. If the relationship looks and behaves like employment, treat the holiday-pay question seriously rather than assuming the "self-employed" label protects you.

Worked Example: Irregular-Hours Operative

Say you take on a casual operative on a zero-hours basis, paid £16 an hour, and over a four-week pay period they work 130 hours.

• Holiday accrued: 130 hours × 12.07% = 15.69 hours of paid holiday banked for the period.
• If you roll it up: their pay for hours worked is 130 × £16 = £2,080. The rolled-up holiday uplift is £2,080 × 12.07% = £251.06, shown as a separate itemised line. Total gross for the period = £2,331.06.
• If you bank it instead: you record 15.69 hours of accrued leave and pay it out at their average hourly rate when they actually take time off (or at the end of the engagement if untaken).

Over a full year, the 12.07% method and the rolled-up approach both arrive at the same place: the operative receives the equivalent of 5.6 weeks' paid holiday proportionate to the hours they actually worked. The rolled-up route just spreads it across every payslip rather than paying it in a lump when leave is taken.

Quick Reference: Holiday Pay by Worker Type

Keep the Records Straight

Most holiday-pay disputes come down to records — or the lack of them. You need to be able to show hours worked, leave taken, accrual balances and how variable pay was averaged. Keeping that data in spreadsheets across multiple jobs and operatives is where small firms slip up and where underpayments quietly build. Tools like Trade2Base help you keep clean records of hours, jobs and pay in one place, so when a worker books leave — or when you need to evidence what you paid — the figures are already there rather than reconstructed after the fact.

Holiday pay is not optional, and the 2024 reforms, while they simplified the casual-worker side, did not reduce the underlying entitlement. Get the calculation method right for each type of worker, include all the variable pay that should count, and — above all — be honest about who is genuinely self-employed and who is really a worker. That last judgement is the one that protects you from the biggest bills.