Benefits & Comp • 8 MIN READ
Annual Leave for Hourly Employees: What You Need to Know
JUN 5, 2026
Managing holiday entitlement for hourly and variable-hours workers has its own rules. Here is a plain-language guide for HR teams.
Statutory minimums for hourly workers
In the UK, all workers, including those on zero-hours, casual, and variable-hours contracts, are entitled to 5.6 weeks of paid annual leave per year. For workers whose hours vary, the leave entitlement is calculated as 12.07% of hours worked in the preceding 52-week reference period. From April 2024, rolled-up holiday pay, where leave pay is included in the hourly rate, became lawful again for irregular-hours and part-year workers, provided it is calculated correctly and shown separately on payslips.
How to calculate holiday pay for variable-hours workers
Holiday pay for irregular-hours workers must reflect the worker's average pay over the previous 52 weeks (excluding weeks with no pay). This means that overtime, commission, and regular shift premiums must be included in the calculation, not just the basic hourly rate. Failure to include these elements has been a significant source of employment tribunal claims. An HRIS that tracks all pay components and automates the 52-week average calculation removes the risk of manual errors.
Common mistakes to avoid
The most common mistakes in holiday management for hourly workers are: failing to include overtime in the holiday pay calculation, using a shorter reference period than 52 weeks, not providing clear records of leave taken and entitlement remaining, and applying a 'use it or lose it' policy without the required notice and facilitation. Employees can claim for underpaid holiday going back several years if a series of underpayments is linked. Regular audits of holiday pay calculations are strongly advisable.
