Rolled-Up Holiday Pay for Irregular-Hours Workers: A Trade Employer's Guide (2026)
If you run a trade business that takes on casual labourers, zero-hours operatives or seasonal staff, working out their holiday pay has always been a headache. How do you give 5.6 weeks of paid leave to someone whose hours swing wildly from week to week, or who only works half the year? Since April 2024 there is finally a clean, legal answer for these workers: rolled-up holiday pay. This guide explains exactly what it is, the rules you have to follow, the 12.07% calculation, and where employers most commonly trip up.
What Is Rolled-Up Holiday Pay?
Rolled-up holiday pay means paying a worker an extra amount on top of every payslip to cover their holiday entitlement, rather than paying them when they actually take leave. Instead of the worker building up paid days off and being paid their normal wage when they take them, you add a separate holiday pay figure to each wage payment as they earn it.
The practical effect is simple: the worker receives their holiday pay continuously, spread across the year, in small chunks. When they do take time off, that time is unpaid — because the pay for it has already been handed over in earlier payslips. For irregular-hours staff this avoids the near-impossible task of calculating an "average week" of pay every time someone wants a few days off.
The History: Banned in 2006, Brought Back in 2024
Rolled-up holiday pay used to be common, then it was effectively outlawed. In 2006 the European Court of Justice ruled (in the joined Robinson-Steele cases) that rolling holiday pay into the hourly rate breached the Working Time Directive, because it could discourage workers from actually taking their leave. For years afterwards, UK guidance treated rolled-up holiday pay as unlawful, and employers were told to pay holiday only when leave was taken.
That changed following the post-Brexit review of working time rules. The Government legislated through the Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 to make rolled-up holiday pay lawful again — but only for irregular-hours workers and part-year workers, and only for holiday leave years beginning on or after 1 April 2024. So if your leave year runs from, say, 1 January, the new rules apply from your first full leave year starting on or after that April 2024 date.
The 12.07% Calculation Explained
The headline figure is 12.07%. You calculate rolled-up holiday pay as 12.07% of the total pay the worker has earned in that pay period, and you add it on top. The percentage is not arbitrary — it falls directly out of the statutory 5.6 weeks of holiday entitlement.
A standard working year is 52 weeks. Take off the 5.6 weeks of statutory holiday and you are left with 46.4 working weeks. Holiday is therefore worth 5.6 ÷ 46.4 of working time, which is 0.1207 — or 12.07%. In other words, for every hour actually worked, the worker earns roughly 7.25 minutes of paid holiday.
| Step | Figure |
|---|---|
| Weeks in a year | 52 |
| Statutory holiday entitlement | 5.6 weeks |
| Working weeks (52 − 5.6) | 46.4 weeks |
| Holiday as a fraction (5.6 ÷ 46.4) | 0.1207 = 12.07% |
Crucially, the 12.07% must be calculated on the worker's total pay in the pay period — not just basic hours. That means it should be applied to overtime, commission, regular bonuses and any other elements that form part of normal remuneration. If you only apply it to basic pay, you are likely underpaying holiday.
Worked Example
Say you employ a labourer on a zero-hours basis at £14 per hour. In a busy two-week pay period they work 70 hours, plus 6 hours at an overtime rate of £21. Here is how the rolled-up holiday pay is calculated.
| Element | Calculation | Amount |
|---|---|---|
| Basic pay | 70 hrs × £14 | £980.00 |
| Overtime | 6 hrs × £21 | £126.00 |
| Total pay in period | £980 + £126 | £1,106.00 |
| Rolled-up holiday pay | £1,106 × 12.07% | £133.50 |
| Gross pay for payslip | £1,106 + £133.50 | £1,239.50 |
The £133.50 is shown as its own line on the payslip labelled clearly as holiday pay. It is paid on top of the £1,106 the worker earned for the hours they did — it is not carved out of it. Getting this distinction wrong is one of the most expensive mistakes employers make (more on that below).
The Rules You Must Follow
Rolled-up holiday pay is legal now, but only if you stick to three conditions. Get any of them wrong and you risk a claim for unpaid holiday going back years.
- It only applies to irregular-hours and part-year workers. You cannot roll up holiday pay for regular salaried or fixed-hours staff. For them you must still provide paid leave in the normal way.
- It must be itemised separately on the payslip. The holiday pay element has to appear as its own clearly identified line. Hiding it inside the hourly rate or lumping it into "gross pay" with no breakdown does not meet the requirement and can render the arrangement invalid.
- Workers still have to take their leave. Rolled-up pay covers the money, not the rest. You must still allow — and actively encourage — the worker to take their 5.6 weeks off. That time is unpaid when taken, because it has already been paid, but the right to take the time remains.
The Alternative: The Accrual Method
Rolled-up pay is optional. The other route for irregular-hours and part-year workers is the accrual method, where holiday builds up as leave hours rather than cash. Under accrual, the worker accrues holiday at 12.07% of the hours they actually work in each pay period, and that holiday sits in a pot to be taken (and paid) later.
So someone who works 100 hours in a period accrues 12.07 hours of paid holiday. When they take that holiday, you pay it at their average weekly rate calculated over the relevant reference period (52 weeks for most irregular workers). The accrual method keeps the "take leave, get paid for it" structure intact, which some employers and workers prefer because it more obviously protects the right to rest. The trade-off is that it requires you to track accrued and used holiday carefully, whereas rolled-up pay clears the slate every payslip.
Who Counts as Irregular-Hours vs Part-Year?
The two categories that qualify for rolled-up pay have specific statutory definitions. It is worth being clear on which of your people fall into them.
| Worker type | Definition | Rolled-up allowed? |
|---|---|---|
| Irregular-hours worker | Hours worked under their contract are wholly or mostly variable in each pay period (e.g. zero-hours labourers, casual fitters). | Yes |
| Part-year worker | Works only part of the year with periods of at least a week where they are not working and not paid (e.g. seasonal groundworkers, term-time staff). | Yes |
| Regular salaried / fixed-hours | Set, predictable hours every period — most employed tradespeople and office staff. | No |
Someone paid the same salary every month for fixed hours is neither irregular-hours nor part-year, even if they happen to do occasional overtime. A worker on a regular four-day-a-week pattern all year round is a part-time worker, not a part-year worker, and does not qualify either. The part-year test hinges on whole weeks of no work and no pay during the year.
Why Regular Salaried Staff Are Different
For your regular employed tradespeople — the ones on a set wage and predictable hours — none of this applies. They keep the traditional system: they accrue their 5.6 weeks of paid annual leave, book it, and receive their normal pay while they are off. You cannot legally roll up their holiday pay, and doing so exposes you to claims that they were never properly paid for leave.
This is why it matters to classify each member of your team correctly. A common pattern in trade businesses is a small core of salaried staff plus a rotating pool of casual or seasonal labour. The salaried core go on the normal accrual-and-book system; the casual pool can go on rolled-up pay. Mixing the two up is where problems start.
Record Keeping and Common Mistakes
Whichever method you use, keep clear records: hours worked per pay period, the holiday pay calculated, and evidence that leave was offered and taken. Payroll software that itemises the holiday line automatically makes this far easier and gives you an audit trail if a claim ever arises. Here are the mistakes that catch trade employers out most often.
- Not itemising it. Failing to show holiday pay as a distinct, labelled line on the payslip is the single most common error. If it is not visible, a tribunal may treat the holiday as never having been paid at all.
- Applying it to the wrong workers. Rolling up holiday pay for salaried or fixed-hours staff is unlawful. Only irregular-hours and part-year workers qualify.
- Forgetting it is on top of normal pay. The 12.07% is an addition to total earnings, not a slice taken out of them. Deducting it from the hourly rate means the worker is effectively funding their own holiday and is underpaid for the work done.
- Calculating on basic pay only. The 12.07% applies to total pay in the period, including overtime, commission and regular bonuses — not just basic hours.
- Never letting people take leave. Paying the money but pressuring workers not to take time off defeats the purpose and undermines the legality of the arrangement.
FAQ
Can I pay rolled-up holiday pay to my regular employed plumbers and electricians?
No. Rolled-up holiday pay is only lawful for irregular-hours and part-year workers. Regular salaried or fixed-hours staff must accrue paid leave and be paid their normal wage when they take it.
Does the 12.07% include overtime and bonuses?
Yes — it should be calculated on total pay in the pay period, which includes overtime, commission and regular bonuses, not just basic hours.
If the holiday is already paid, do workers still get time off?
Yes. Rolled-up pay covers the money only. Workers retain the right to take their full 5.6 weeks of leave; that time is simply unpaid when taken because it has already been paid through the rolled-up amounts.
When did rolled-up holiday pay become legal again?
For holiday leave years beginning on or after 1 April 2024, for irregular-hours and part-year workers. It had been treated as unlawful since the 2006 European court ruling.
Do I have to use rolled-up pay for casual staff?
No. It is one of two options. You can instead use the accrual method, where holiday builds up as leave hours at 12.07% of hours worked and is paid when taken.
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