Understanding the 12.07% Holiday Pay Accrual Method
Overview
From April 2024, employers can use rolled‑up holiday pay for irregular hours and part‑year workers. This method allows holiday pay to be calculated as a percentage of pay and issued alongside normal wages, rather than when leave is taken. The percentage used is 12.07%, a figure derived directly from statutory holiday entitlement.
This guide explains where 12.07% comes from, how it is calculated, and what employers must do to remain compliant.
1. Statutory Holiday Entitlement
All workers in the UK are entitled to 5.6 weeks of paid annual leave per leave year.
To convert this entitlement into a percentage for irregular hours workers, we compare the number of holiday weeks to the number of working weeks in a year.
2. Calculating the 12.07% Accrual Rate
Step 1 — Total weeks in a year
There are 52 weeks in a year.
Step 2 — Subtract statutory holiday entitlement
Workers are entitled to 5.6 weeks of leave.
52 weeks – 5.6 weeks = 46.4 working weeks
Step 3 - Convert holiday entitlement into a percentage of working time
We calculate the proportion of holiday weeks to working weeks as follows:
5.6 ÷ 46.4 = 0.1207
We then need to convert this into a percentage:
0.1207 = 12.07%
This means that for every hour worked, a worker accrues 12.07% of an hour of paid holiday.
3. When Employers Can Use the 12.07% Method
From April 2024, rolled‑up holiday pay is permitted only for:
Irregular hours workers
Part‑year workers
Employers must:
apply the 12.07% accrual method correctly;
pay the holiday uplift alongside normal wages;
show rolled‑up holiday pay separately on payslips;
clearly communicate the arrangement to workers.
This method cannot be used for regular hours workers.
4. Why the 12.07% Method Exists
The percentage approach is designed for workers whose hours vary significantly, or do not work every week of the year. For these groups, traditional accrual methods are impractical.
The 12.07% method provides:
a consistent, transparent calculation;
a fair reflection of statutory entitlement;
a compliant approach for irregular working patterns.
5. Employer Compliance Requirements
To remain compliant, employers must ensure that:
rolled‑up holiday pay is clearly itemised on payslips;
workers understand how their holiday pay is being calculated;
the method is used only for eligible worker categories; and
payroll systems apply the percentage accurately.
6. Example Calculation
If a worker earns £500 in a pay period:
£500 × 12.07% = £60.35 holiday pay
Total pay for the period:
£500 wages + £60.35 rolled‑up holiday pay = £560.35
This must be shown as two separate lines on the payslip.
Summary
The 12.07% accrual rate is a statutory‑based calculation that converts annual leave entitlement into a percentage suitable for irregular hours and part‑year workers. When used correctly, it provides a compliant and transparent method for calculating rolled‑up holiday pay. Employers should ensure the method is applied accurately, communicated clearly, and supported by appropriate payroll processes.
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