In the UK, overtime that has been regularly paid in the 52 weeks before your leave starts must be included in your holiday pay for the first four weeks of annual leave. It does not have to be included for the remaining 1.6 weeks, which can lawfully be paid at basic rate.
Whether overtime also increases the amount of leave you get is a separate question with a different answer, and it changed in 2024. This guide keeps the two apart, because conflating them is the reason so many payroll calculations are wrong.
Key Takeaways
- Since 1 January 2024 the rule is in statute, not just case law: regulation 16(3ZA) of the Working Time Regulations 1998 requires “other payments, such as overtime payments, which have been regularly paid to a worker in the 52 weeks preceding the calculation date” to be included.
- This applies to the 4 weeks under regulation 13 (and regulation 15B leave). The extra 1.6 weeks under regulation 13A may be paid at basic rate.
- Overtime does not increase holiday entitlement for regular-hours workers — 5.6 weeks is 5.6 weeks.
- It does increase entitlement for irregular hours and part-year workers, who accrue 12.07% of hours actually worked in each pay period.
Two Different Questions
Ask these separately every time.
| Does overtime increase my entitlement? | Does overtime increase my holiday pay? | |
|---|---|---|
| Regular-hours worker | No. Entitlement is 5.6 weeks regardless of hours worked | Yes, for the first 4 weeks, if regularly paid |
| Irregular hours / part-year worker | Yes. Entitlement accrues at 12.07% of hours worked, and overtime hours are hours worked | Yes, and the same 12.07% underpins rolled-up pay if used |
A full-time employee who works 200 hours of overtime a year gets no extra days off for it, but every day of their first four weeks should be paid at a rate that reflects it. A zero-hours worker who picks up extra shifts gets both more entitlement and more pay.
What the Law Now Requires
Before 2024 this area was governed by a stack of case law — Bear Scotland, Dudley MBC v Willetts, Flowers v East of England Ambulance Service. The Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 wrote the outcome into regulation 16 itself, with effect from 1 January 2024. That is the current position in 2026.
Regulation 16(3ZA) says three categories must be included when calculating a week’s pay for regulation 13 and 15B leave:
- (a) payments, including commission, “intrinsically linked to the performance of tasks which a worker is obliged to carry out under the terms of their contract”;
- (b) payments for professional or personal status relating to length of service, seniority or professional qualifications;
- (c) “other payments, such as overtime payments, which have been regularly paid to a worker in the 52 weeks preceding the calculation date”.
Regulation 16(3ZB) adds the mechanism: where those payments are not already captured in a week’s pay under sections 221 to 224 of the Employment Rights Act 1996, average them weekly over the relevant period and add the result on.
Which types of overtime count?
| Type of overtime | Included in the 4 weeks? |
|---|---|
| Guaranteed and compulsory | Yes — it is part of normal remuneration |
| Non-guaranteed but compulsory when offered | Yes |
| Voluntary, but worked with regularity | Yes, if regularly paid in the preceding 52 weeks |
| Genuinely one-off or exceptional | No |
“Regularly” is not defined in the regulations. The practical test is whether the payment is sufficiently settled and recurring to form part of what the worker normally earns. A monthly pattern over a year is clearly regular. Two isolated weekends in twelve months is not. Anything between is a judgement call, and the safe course for employers is to include it.
The 52-Week Reference Period
Regulation 16(3)(e) replaces the old 12-week averaging with 52 weeks. Two refinements matter.
- Weeks with no pay are skipped. Where a week produced no remuneration, you count back further to find a paid week, looking back up to 104 weeks in total under regulation 16(3)(f).
- Short-service workers use what they have. If the worker has been employed for fewer than 52 complete weeks at the calculation date, the reference period is the number of complete weeks they have been employed.
The calculation date is the first day of the period of leave in question, so the reference period moves with each holiday.
Worked Example: Splitting the 5.6 Weeks
Ravi is full-time on a five-day week. His basic pay is £600 per week. Over the last 52 weeks he has been paid £4,160 in overtime — an average of £80 per week. His employer’s leave year runs January to December and his entitlement is the statutory 28 days.
Step 1 — split the entitlement.
- Regulation 13 leave: 4 weeks = 20 days
- Regulation 13A leave: 1.6 weeks = 8 days
Step 2 — set the two daily rates.
- Regulation 13 days: (£600 + £80) ÷ 5 = £136.00 per day
- Regulation 13A days: £600 ÷ 5 = £120.00 per day
Step 3 — total the year.
- 20 × £136.00 = £2,720.00
- 8 × £120.00 = £960.00
- Total holiday pay = £3,680.00
If the employer had paid all 28 days at basic rate, Ravi would have received £3,360 — an underpayment of £320 for the year, per employee. Across a 60-person workforce with similar overtime patterns, that is roughly £19,000 a year of unpaid holiday pay, plus the tribunal exposure that comes with it.
A practical note: many employers pay all 5.6 weeks at the enhanced rate rather than run two. It costs slightly more and removes an entire category of error. Where you do split, you also need a rule on which days are taken first — the regulations do not say, so record your ordering in writing.
Irregular Hours and Part-Year Workers
For leave years beginning on or after 1 April 2024, irregular hours and part-year workers accrue leave at 12.07% of the hours actually worked in each pay period. GOV.UK’s reform guidance defines an irregular hours worker as one whose paid hours in each pay period are “wholly or mostly variable”, and a part-year worker as someone required to work only part of the year with unpaid gaps of at least a week.
For these workers, overtime hours simply are hours worked, so they feed the 12.07% and increase entitlement directly. Employers may also use rolled-up holiday pay for this group — 12.07% of total pay in each pay period, which must be clearly shown as a separate item on the payslip and notified to the worker in advance. Our guide to variable hours holiday entitlement after Harpur Trust v Brazel covers how the 2024 reforms replaced the old case-law position.
What This Means for You
If you are a worker, check a payslip covering a holiday week against a normal week. If the two are identical and you regularly work paid overtime, your first four weeks are probably being underpaid. Ask payroll in writing which reference period they used and how the 4/1.6 split is applied. Unlawful deduction claims normally have to be brought within three months of the deduction, so do not sit on it.
If you are an employer, four actions close most of the exposure:
- Identify every payment type in your payroll and classify it against regulation 16(3ZA).
- Decide whether to run two holiday rates or pay all 5.6 weeks at the enhanced rate, and document the decision.
- Automate the 52-week rolling average. Doing it by hand each time a leave request is approved is where errors enter.
- Keep the records. From 6 April 2026 employers must keep records showing compliance with holiday entitlement and pay rules, retained for six years, per ACAS.
Accurate holiday pay starts with accurate leave data — which days, which category, which worker. Our UK holiday pay calculation guide walks through the payroll side in more depth, and the UK annual leave entitlement guide covers the entitlement rules that sit underneath it.
Leave Balance records every day of leave against the right entitlement category, so your payroll team knows exactly which days fall in the 4 weeks and which in the 1.6. Flat $10/month, unlimited employees, 14-day free trial.
leave emails? Track your employee's leave with Leave Balance
This article is general information about UK employment law, not legal advice. Check your own contract, and take advice on your specific circumstances.