Holiday Pay for Irregular-Hours Workers: How the 12.07% Works

If a labourer’s hours change from week to week, their holiday builds up at 12.07% of the hours they actually work, credited at the end of each pay period. You can also pay their holiday pay as a 12.07% top-up on every payslip, known as rolled-up holiday pay, but only for these workers and only on a separate payslip line. Get the first step right, deciding who counts, and the rest is arithmetic.

The rules sit in the Working Time Regulations 1998, the law that gives workers 5.6 weeks’ paid holiday a year. The Department for Business and Trade owns the policy, and employment tribunals hear claims. It is a legal requirement for anyone employing workers in England, Scotland and Wales. The Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 added the 12.07% method and rolled-up pay. Both apply to leave years starting on or after 1 April 2024. Northern Ireland has its own working time rules, which this article doesn’t cover.

Who counts as an irregular-hours or part-year worker

The rules cover two kinds of worker, and the test is what the contract says, not what last month’s timesheets show.

• Irregular-hours worker: under regulation 15F, the paid hours in each pay period are, under the contract, “wholly or mostly variable”. Zero-hours and casual labourers usually fit here.
• Part-year worker: the contract requires work for only part of the year, with gaps of at least a week that are neither worked nor paid. A groundworker or exterior decorator taken on for the season, with unpaid weeks off in winter, can fit here.

A labourer on a fixed 40-hour week who picks up some overtime is not an irregular-hours worker. Neither is someone on a rota that changes but adds up to set hours. They stay on the old rules, covered further down, and you can’t roll up their holiday pay.

Genuinely self-employed subcontractors get no statutory holiday pay. But being paid under the Construction Industry Scheme, HMRC’s tax-deduction scheme for construction payments, doesn’t settle someone’s employment status. A person HMRC treats as self-employed for tax can still be a worker in employment law. HMRC’s CIS guidance also warns of a penalty of up to £3,000 for giving the wrong status for a subcontractor on your monthly return.

How the 12.07% builds up

The worker accrues holiday “on the last day of each pay period at the rate of 12.07% of the number of hours that they have worked during that pay period”, under regulation 15B. Three details decide the number:

• Rounding: each period’s figure is rounded to the nearest whole hour, and exactly 30 minutes rounds up.
• Timing: the worker can take leave earned in one pay period from the next.
• Cap: no more than 28 days can build up in a leave year.

The figure itself comes from the 5.6 weeks. A year has 52 weeks, so a worker on 5.6 weeks’ leave works 46.4 weeks, and 5.6 is 12.07% of 46.4. If your contracts give more than the statutory minimum, the percentage goes up with it. The government’s own example shows 6 weeks’ leave working out at 13.04%. Using 12.07% for that worker would underpay them.

Worked through a season

Take an illustration, not a real payroll. A groundworks firm takes on a labourer for the season at £14.00 an hour, paid weekly, with unpaid weeks off over winter. He works 30 weeks of 40 hours, 1,200 hours in all, with no overtime or bonuses. His £14.00 is above the National Living Wage of £12.71 an hour for workers aged 21 and over from April 2026.

• Each 40-hour week: 40 × 12.07% = 4.83 hours, which rounds to 5 hours of holiday.
• A 33-hour week: 3.98 hours, which rounds to 4.
• A 29-hour week: 3.5 hours, which rounds up to 4.
• Over the season at 40 hours a week: 30 × 5 = 150 hours of holiday.

There are then two ways to pay for those hours. Paid when he takes the leave, his holiday rate works out at £14.00 an hour, so the 150 hours cost about £2,100. Rolled up, he gets 12.07% of each week’s £560, which is £67.59 a week and £2,027.70 across the season. The gap comes only from rounding the hours each week. Both methods follow the rules.

Rolled-up holiday pay: allowed, but only like this

Rolling up is optional. Regulation 16A lets you pay holiday “by way of a 12.07% uplift to the worker’s remuneration for work done” for these workers, and only for them. If you use it, four conditions come with it.

1. Same pay run. The holiday pay goes out at the same time as the pay for the hours worked.
2. Its own payslip line. The payslip “must indicate the amount of holiday pay”. A rate described as “£15.69 an hour including holiday”, with no separate figure, doesn’t meet the rule.
3. Worked out on total pay. The 12.07% applies to everything that counts as a week’s pay, including regular overtime, commission tied to the job and premiums. It isn’t just the basic rate.
4. The basic rate still meets the minimum wage on its own. The government’s guidance says rolled-up pay comes “in addition to the worker’s normal salary, which should be at National Minimum Wage or above”.

Switching existing staff to rolled-up pay may change their contract, so check the contract and tell them before you start. Rolling up also doesn’t remove your duty to give them the chance to take their leave. As Acas points out, a worker on rolled-up pay gets no pay when they’re on holiday, and that “might put some workers off taking holidays”. The hours still exist as time off. If you don’t let them take it, it can carry forward.

Paying holiday pay when the leave is taken

If you don’t roll up, you pay the worker when they take the leave. For irregular-hours and part-year workers, you pay all of it at “normal” pay: an average of the last 52 weeks in which they were paid, ignoring weeks with no pay. Normal pay includes regularly paid overtime, task-linked commission and payments for seniority or qualifications.

This is where your fixed-hours staff differ. A labourer on set hours is still on 5.6 weeks a year, with no 12.07% accrual. You pay four of those weeks at normal pay, overtime included, and you can pay the remaining 1.6 weeks at basic pay. And you can’t roll up their holiday pay at all.

Season end, leavers and records

When the season ends and the job ends with it, pay in lieu for any accrued holiday he hasn’t taken. That’s the only point at which you can swap leave for money. If you rolled his holiday pay up, nothing more is due for leave already paid through the uplift. Clawing back leave taken in advance needs a written agreement made beforehand.

For a worker who stays on, part of the leave can carry into the next year if you agree it. The 8-day carry-over figure you may have seen applies to regular-hours staff. For irregular-hours and part-year workers, the regulation sets no number.

Since 6 April 2026, you also have to keep records that show you’ve given the leave and paid it correctly, and keep them for six years. The Employment Rights Act 2025 added the duty, and failing to keep adequate records is now a criminal offence. Record the hours accrued each pay period, leave taken, holiday pay and what went into it, carry-over and any pay in lieu. Our guide to what the Employment Rights Act changes for small employers covers the other 2026 dates.

Enforcement is changing too. The new Fair Work Agency already enforces the minimum wage. The power for it to enforce holiday pay is in the 2025 Act but, as at 18 October 2026, had not yet been brought into force. In the meantime, a worker can still take an underpayment to an employment tribunal. Where the last wrong payment was made on or after 1 October 2026, the time limit is generally six months less a day, up from three, under the regulations that brought the longer limits into force.

The choice for the season

For the labourer in the example, the decision comes down to one choice made at the start of the season: £67.59 on every payslip, or about £2,100 paid as he takes his 150 hours. Either is lawful, as long as the payslip or the holiday record shows it. Either way, his holiday adds 12.07% to what his hours cost you, which is worth knowing before you fix next spring’s prices. Our look at builders’ day rates in the UK shows how widely rates spread. More guides are in our UK business admin section.