Introduction
Annual leave is one of the first employment rights a new employer has to get right, and one of the easiest to get wrong. The headline rule looks simple: every worker gets 5.6 weeks of paid holiday a year. Then the questions start. What does that mean for someone who works three days a week? What happens when hours change from month to month? Do bank holidays come on top, or count inside the total?
This guide works through the rules step by step, with the actual calculations.
The statutory minimum, in plain numbers
Almost every worker in the UK is entitled to 5.6 weeks of paid annual leave in each leave year, from the first day of employment. You can offer more, but never less.
For a full-time employee who works five days a week, 5.6 weeks works out at 28 days a year: 5 days multiplied by 5.6 equals 28. That 28-day figure is also the cap. Someone who works six days a week still gets 28 days, not 33.6. The leave year is the 12-month period over which entitlement is measured. You can choose any start date, provided it is written down and applied consistently. A new starter who joins part-way through the year gets a pro-rata share for the months that remain.
How much leave do part-time staff get?
Part-time workers get the same 5.6 weeks, scaled down to their working pattern. The formula is simple: days worked per week multiplied by 5.6. A worker on a three-day week gets 16.8 days a year, and a worker on a four-day week gets 22.4 days. Fractions are normal, and you must not round them down, because that would take entitlement below the statutory minimum.
| Days worked per week | Statutory entitlement per year |
|---|---|
| 1 day | 5.6 days |
| 2 days | 11.2 days |
| 3 days | 16.8 days |
| 4 days | 22.4 days |
| 5 days | 28 days |
| 6 days | 28 days (capped) |
The same principle applies when someone changes pattern mid-year. If an employee moves from five days to three days halfway through the year, work it out in two parts: 14 days for the first half and 8.4 for the second, giving 22.4 days, minus leave already taken. Do the calculation on the day the pattern changes and tell the employee in writing. Put the formula and your rounding rule in your essential HR policies so every manager applies it the same way.
Bank holidays: included or extra?
Bank holidays are not automatically extra days on top of the 28. The statutory minimum of 28 days can include the usual eight bank holidays in England and Wales, which leaves 20 days for the employee to choose.
Most small employers include bank holidays in the 28 days, because it is simple to administer and matches the legal minimum. The second option is to offer 28 days plus bank holidays, which gives 36 days in a typical year. That is more generous, but it costs eight extra paid days per employee per year. Whichever option you choose, put it in writing in the contract and the staff handbook. If you shut the business on bank holidays, say so explicitly, and say whether those closure days come out of the employee’s entitlement. Record the choice in your employee handbook.
Irregular hours and part-year workers: the 12.07% rule
The hardest cases are workers whose hours change from week to week, such as casual staff, zero-hours workers, and term-time staff who only work during school terms. For leave years starting on or after 1 April 2024, irregular-hours workers and part-year workers accrue leave at 12.07% of the hours they actually work in each pay period.
The figure comes from the entitlement itself: 5.6 divided by 46.4 working weeks equals 12.07%. So for every 100 hours worked, the worker accrues 12.07 hours of paid leave. Accrual happens at the end of each pay period, and the leave is then available to take, subject to your normal booking rules.
| Hours worked in the pay period | Leave accrued (12.07%) |
|---|---|
| 10 hours | 1.21 hours |
| 20 hours | 2.41 hours |
| 35 hours | 4.22 hours |
| 80 hours | 9.66 hours |
| 100 hours | 12.07 hours |
The 12.07% method applies only to irregular-hours workers and part-year workers. A regular part-time employee who works the same three days every week is not an irregular-hours worker, so use the pro-rata formula above instead.
How holiday pay is worked out
Holiday pay is based on a 52-week reference period. To work out a week’s holiday pay, look back at the 52 weeks before the holiday starts, take the weeks in which the worker was actually paid, and calculate the average weekly pay over those weeks.
The reference period matters most for workers whose pay varies: overtime, commission, and bonuses that are regularly earned all count towards holiday pay for the four-week EU-derived part of the entitlement. Excluding regular overtime from holiday pay is one of the most common underpayment mistakes in small businesses, so check your payroll setup against this rule.
Rolled-up holiday pay: when it is legal
Rolled-up holiday pay means adding an uplift to a worker’s hourly pay instead of paying them separately when they take leave. For example, a worker on £12 an hour would be paid £13.45, with the extra £1.45 as the 12.07% uplift, and then takes unpaid time off instead of paid leave.
This arrangement is legal only for irregular-hours workers and part-year workers, and only for leave years starting on or after 1 April 2024. It is not legal for regular full-time or part-time staff, and it is not a general shortcut. If you use it, the payslip must show the holiday pay as a separate line, so the worker can see exactly how much of their pay is holiday pay. A single combined figure with no breakdown does not meet the requirement. Rolled-up pay suits some casual arrangements well, because it avoids building up small balances of accrued hours, but the worker still has the right to take the time off. It changes when the money is paid, not whether the leave exists.
Booking leave, carrying it over, and leaving
A good booking system prevents most leave disputes. Set a simple rule: leave must be requested in advance, the employer can refuse a request if the dates clash with business needs, and the employer can also require leave at particular times, such as a Christmas shutdown, provided enough notice is given.
Carry-over is where the two parts of the 5.6 weeks matter. The four weeks of EU-derived leave generally cannot be carried into the next leave year, except where the worker could not take it because of sick leave or maternity leave, or where the employer failed to give them a proper opportunity to take it. The additional 1.6 weeks can be carried over if your contract allows it, often with a limit such as five days and a deadline for using them. If your contract says nothing, the 1.6 weeks cannot be carried over either, so check what yours says before telling an employee their unused days are lost.
When an employee leaves, they must be paid for any statutory leave they have accrued but not taken, calculated up to their leaving date. Payment in lieu is only allowed on termination. Our employing staff first time checklist covers the wider first-hire setup. An employee who falls ill during a holiday can ask to convert those days to sick leave; our statutory sick pay employer guide explains the overlap.
What changes on 6 April 2026: keep records for six years
From 6 April 2026, employers must keep records of annual leave and holiday pay for six years.
Keep the following for each employee: their leave year dates and total entitlement, the leave they booked and took, their accrued balance if they are an irregular-hours or part-year worker, the holiday pay paid and how it was calculated, and any carry-over agreed. A simple spreadsheet or payroll software covers all of this, provided it is backed up and someone other than one person knows where it lives.
One related change to be aware of: from 1 January 2027, the qualifying period for unfair dismissal falls from two years to six months.
A leave policy checklist for a small employer
Use this checklist to turn the rules into a policy you can actually use.
Name the leave year and start date.
State full-time entitlement and the part-timer pro-rata formula.
Say how irregular-hours staff accrue at 12.07%, and whether you use rolled-up pay.
Set the booking process, notice periods, and who approves requests.
Set the carry-over rule for the additional 1.6 weeks, with any limit and deadline.
Explain that accrued leave is paid on the final payslip when someone leaves.
Name where records are kept and who updates them.
Put the policy in the handbook and contract, and give every starter a copy on day one.
Conclusion
Annual leave is not a favour you grant staff. It is a statutory entitlement of 5.6 weeks a year, capped at 28 days, with clear maths for part-time staff, a 12.07% accrual rule for irregular-hours and part-year workers, and holiday pay based on a 52-week average.