Statutory holiday and the legal floor
UK statutory holiday entitlement is 5.6 weeks per leave year, which for a full-time five-day worker comes to 28 days (usually including bank holidays in the count). The Working Time Regulations 1998 set this as the legal floor. Section 14 of those regulations requires any unused statutory leave at termination to be paid out as cash. The employer cannot refuse and the employee cannot waive this entitlement.
The 28-day figure is the floor; many UK contracts give more. A common pattern is 25 days plus 8 bank holidays (33 total) or 28 days plus 8 bank holidays (36 total). The extra days above 28 are contractual rather than statutory, which changes how they’re handled at termination.
How accrued holiday is calculated
Annual entitlement is pro-rated for the portion of the leave year you’ve worked. If your leave year runs January to December, your annual entitlement is 28 days, and you leave at the end of June, you’ve accrued 6/12 × 28 = 14 days. Anything you’ve already taken comes off the accrual; anything left is paid out.
The cash value uses your normal daily rate. For monthly-paid full-time employees: weekly pay ÷ working days per week × accrued days. Example: £600/week, 5 working days, 10 days accrued = £600/5 × 10 = £1,200 holiday pay. The holiday entitlement calculator handles the calculation including part-year and part-time adjustments.
Bank holidays and the count
Whether bank holidays fall inside or outside the count depends on your contract. Two common patterns:
- “Inclusive”: bank holidays come out of your annual entitlement. A 28-day entitlement covers 20 chosen days plus 8 bank holidays.
- “Plus”: bank holidays are separate from the count. A “25 days plus bank holidays” contract gives 33 days total, but only 25 of those are at your discretion.
Most UK office contracts use the “plus” pattern. The distinction matters at termination because bank holidays falling between your resignation and last working day count differently in each.
Contractual holiday above statutory
Days above the statutory 28 are contractual. Whether they’re paid out at termination depends on what the contract says. Three common scenarios:
Contract silent on the point: the contractual days are typically paid out alongside statutory days. This is the default position for most employees.
Contract says “use it or lose it”: contractual days you haven’t taken by the last working day are lost. The statutory 28 are still paid; the contractual extras are not. Worth checking the contract specifically before the last few weeks.
Contract requires use during notice: many employers add a clause that lets them direct you to use accrued leave during notice. If you have 15 days accrued when you resign and the employer invokes this clause, you take 15 days off during the notice period; the cash payout at termination is correspondingly lower (or zero).
Tax treatment
Holiday pay is fully taxable as earnings. PAYE income tax and employee National Insurance both apply. It appears as a separate line in your final pay packet but sits in the same tax category as your salary. There’s no special treatment and it doesn’t share the £30,000 termination payment allowance (which covers statutory redundancy and ex-gratia only).
What to check before your last day
Confirm with HR or payroll, ideally a week before your last day: how many days of accrued leave you have, the daily rate they’ll use to calculate the payout, whether any contractual holiday is treated as “use it or lose it”, and whether the employer is requiring you to take any leave during the rest of the notice period rather than paying it out.
Common errors at this stage: daily rate calculated wrongly (especially for non-standard work patterns); accrual not including the notice period itself; bank-holiday treatment inconsistent with the contract. Errors are easy to fix before payroll runs the final calculation. Harder, but still possible, afterwards.
If something looks wrong
Holiday pay errors are an “unauthorised deduction from wages” under the Employment Rights Act 1996. You can raise it as a grievance, then escalate to ACAS early conciliation, then to an employment tribunal if necessary. The time limit for a tribunal claim is three months less one day from the date the deduction should have been paid. Don’t sit on the dispute.
Frequently asked questions
- Does unused holiday have to be paid out when I leave?
- Statutory holiday entitlement that you've accrued but not taken must be paid out as cash on termination. Contractual holiday above the statutory minimum (some contracts give 25 or 28 days plus bank holidays) can be lost if the contract specifies that and you haven't taken it.
- How is unused holiday pay calculated?
- Days accrued × normal daily rate. For monthly-paid employees: take your weekly pay, divide by your usual working days per week (typically 5), multiply by accrued days. So someone on £600/week, 5 days/week, with 10 days accrued, gets £600/5 × 10 = £1,200 holiday pay at termination.
- Is unused holiday pay taxed?
- Yes. It's treated as normal earnings and taxed under PAYE plus National Insurance, the same as your salary. It doesn't share the £30,000 tax-free termination allowance; that allowance only covers statutory redundancy and ex-gratia portions.
- Can my employer force me to take holiday during notice instead of paying it out?
- Usually yes, if your contract gives them that right (most do). The clause typically reads 'the company may direct you to take any accrued holiday during your notice period'. This reduces the cash payout at termination but means you spend some of the notice on leave at full pay.
General information about UK holiday entitlement at termination. For your specific situation, contact ACAS or an employment-law solicitor.