(England) I believe my employer is miscalculating my holiday pay
Hi all,
I’m looking for advice regarding my employer’s holiday pay calculation method and whether it complies with UK law. As far as I’m aware, this applies to every hourly paid member of staff in this company, not just me. Also I apologise in advance for how long this post is.
So from the start of my employment in June last year to the beginning of April 2026 I have been contracted to 5 days a week (38 hours a week/ 3x8 hours + 2x7 hours), whereas now I only work 4 days a week having dropped one of my short days. My hours are fixed and my shift pattern has never changed. Although I work on a “standard hour plan” with a rate of £13.83 per hour and, as far as I understand, would still be considered a worker with variable pay, my performance has never been high enough for me to earn that much, therefore I always get paid minimum wage. Recently I found out that my daily holiday pay has gone down to below what my average day rate is, despite the NMW going up in April, which is what prompted me to start looking into this.
Essentially, my employer uses a fixed holiday pay rate which is recalculated once per year in April, and remains fixed for the whole year. They explained the calculation to me as follows:
“The daily rate is a fixed amount and runs from the beginning of April each year. The calculation is based on the previous year’s taxable earnings (the P60 figure) divided by the weeks in the year and the number of contracted days.”
My concern is that this method seems to factor in a lot of things that reduce earnings, for example:
*Unpaid sickness absences
*Days where in quieter seasonal periods employees go home early without pay
*Previously underpaid holiday periods, which are included in the P60 figure
*Pay rises/ minimum wage increases which don’t seem to affect holiday pay until the following year
Payroll continued their explanation with:
“[My name]’s figure is based on [their] earnings for the 37 weeks of working in the 2025/2026 tax year. [My name]’s performance was consistently below 100% and [they] had four sickness absences; both these factors will impact [their] average daily rate.”
This makes me feel like they knowingly include sickness-reduced earnings in future pay calculations, and my understanding is that workers with variable pay are normally entitled to holiday pay based on an average from the last 52 paid weeks, which should be worked out every time holiday is taken. What my employer seems to be doing is dividing the total income from the previous year by the number of weeks I have been employed at the company (not weeks I have actually worked and been paid for), and then by my contracted days, even if I was absent or left early on some of them.
My employment contract does not mention a fixed annual holiday rate, using the P60 taxable income as a basis for the calculation, or even this method itself, so my questions are:
*Is it lawful to fix a holiday pay rate for an entire year?
*Can absence from work for which I don’t get paid affect future holiday pay like this?
*Does the fact that my contract doesn’t provide any information on holiday pay or how it’s calculated matter at all?
*Is using the figure from the P60 an accurate way to calculate holiday pay?
And lastly:
Assuming that their method is correct, how should my holiday pay be calculated for this year, taking into account that I now work 4 days a week?
Thank you in advance!