Calculating Holiday Pay for Staff that Work Variable Hours or Regular Overtime

If you are an employer with staff that regularly get paid overtime, commission or bonuses, you must include these payments in at least 4 weeks of your paid holiday. Furthermore, employers need to ensure the correct amount of paid holiday is being awarded to workers with variable hours.

  • Sara Bishop
  • September 9th 2022

How many weeks’ holiday pay are employees entitled to?

Most workers are entitled to 5.6 weeks’ paid holiday a year and entitled to a week’s pay for each week of statutory leave that they take.

A week’s pay is worked out according to the hours someone works and how they are paid for the hours. This includes full-time, part-time, term-time and casual workers.

Employers might include overtime, commission and bonus payments in an employee’s full 5.6 weeks' paid holiday, but they do not have to. This is because the law on overtime, commission and bonus payments being included in holiday pay is based on the EU Working Time Directive, which is 4 weeks' holiday.


How do I calculate holiday pay?

Weekly or hourly rate

To calculate average hourly rate for workers on fixed hours and fixed pay (full- or part-time), only the hours worked and how much was paid for them should be counted. Take the average rate over the last 52 weeks.

For staff doing shift work with fixed hours (full- or part-time), use the average number of weekly fixed hours a worker has worked in the previous 52 weeks, at their average hourly rate

A ‘week’ usually runs from Sunday to Saturday. Only use another 7-day period (like Thursday to Wednesday) if that’s how a worker’s pay is calculated.

If no pay was paid in any week, count back another week so the rate is based on 52 weeks in which pay was paid. You can count back a maximum of 104 weeks to find these.  

If a worker has less than 52 weeks of pay, use the average pay rate for the full weeks they have worked.


Workers with no fixed hours 

For staff doing casual work, including those on zero-hours contracts, you should calculate their average pay from the previous 52 weeks ensuring you only count the weeks in which they were paid.


Workers who are paid monthly

To work out a week’s holiday pay for someone who’s paid monthly:

  • Calculate the worker’s average hourly pay for the last month. Do this by dividing the month’s pay by the number of hours worked in the month.
  • Calculate the weekly pay. Do this by multiplying the average hourly pay by the number of hours worked in a week.


Update your employment contracts if needed

All employees must have an employment contract with their employer, and this agreement should include setting out an employee’s rights and entitlements.

Holiday pay should be paid for the time when annual leave is taken. An employer cannot include an amount for holiday pay in the hourly rate (known as ‘rolled-up holiday pay’). If a current contract still includes rolled-up pay, it needs to be re-negotiated.


Inform LWA

If LWA are your appointed outsourced Payroll Services provider, please ensure you give us the correct  information when you calculate your employees holiday pay or please send all the information to us if you need us to calculate on your behalf.


Further information

You can use the online Holiday Calculator from to work out how much leave someone should get.


The Payroll Services team at LWA are also here to support you if you have any queries about holiday pay entitlement. Please contact Sara or Angela on 0161 905 1801 or you can email or