Holiday pay for irregular-hours workers: the 12.07% method


Calculating holiday pay for staff with fixed hours is easy: a week's pay for a week's holiday. For irregular-hours workers and part-year workers, it has been a legal saga. Since January 2024, the rules are clearer, and the 12.07 percent method is back on solid ground. Here is how it works in practice.

Where the 12.07% comes from

Full-time workers get 5.6 weeks of statutory holiday a year. That means for every 46.4 weeks worked, 5.6 weeks are holiday: 5.6 divided by 46.4 is 12.07 percent. So an irregular-hours worker accrues holiday at 12.07 percent of hours worked in each pay period. Work 20 hours this week, accrue 2.41 hours of holiday. Simple, proportional, and now explicitly lawful.

Rolled-up holiday pay is back

The 2024 regulations also re-legalised rolled-up holiday pay for irregular-hours and part-year workers: you can pay the 12.07 percent as an uplift on each payslip instead of paying it when holiday is taken. Two conditions: it must be calculated at the correct rate, and it must be shown as a separate line on the payslip. "Separate line" is the bit employers get wrong; burying it inside basic pay does not count.

What counts as irregular hours

The rules apply to workers whose hours vary (zero-hours, casual, variable shifts) and part-year workers (term-time only, for example). Regular part-timers with fixed hours use the standard pro-rata method instead. Getting the classification right matters, because the methods are not interchangeable.

The common mistakes

First, applying 12.07 percent to the wrong pay figure: holiday pay must reflect normal remuneration, including regular overtime and commission, not just basic hourly rate. Second, forgetting the separate payslip line for rolled-up pay. Third, capping accrual: holiday continues to accrue during sick leave and family leave, and the 12.07 percent method must reflect that.

Keep it in the payroll routine

Holiday calculations should be part of the standard payroll checklist, not a year-end panic. Payroll providers and outsourced finance teams, such as Finex Outsourcing, build the accrual into the monthly run so the numbers are right every payslip, not just when someone complains.


 

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