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Holiday pay on overtime
If your people work overtime regularly, four of their 5.6 weeks of holiday have to be paid at what they normally earn, not at basic. This works out the gap, per person and across a team.
A week's holiday, paid correctly
A week's holiday, paid at basic
What most payroll systems do by default.
Shortfall if all 5.6 weeks are paid at basic
What counts as regular
There is no statutory number of shifts. The test is whether the payment is settled and habitual enough to be part of what the person normally earns, judged across the 52 paid weeks before the holiday. Someone working most Saturdays is plainly regular. Someone who did three in a year is not. Guidance draws no distinction between voluntary and non-guaranteed overtime, so "they didn't have to do it" is not an answer.
The same logic applies to shift premiums, unsocial hours payments, standby allowances and commission that is tied to the work itself. A genuinely discretionary one-off bonus is different.
The reference period
Average the 52 paid weeks immediately before the holiday. Skip any week with no pay and go further back to find a paid one, up to a maximum look-back of 104 weeks. If the person has worked for less than 52 weeks, use however many they have. Averaging over 52 weeks is what stops a seasonal peak or a quiet month distorting the figure.
How this usually comes to light
Rarely through an audit. Usually one person works it out, mentions it, and then everyone on the same pattern realises they are in the same position. Claims for unlawful deduction from wages carry a two-year backstop in Great Britain, and a gap of more than three months between deductions can break the series, so the exposure depends on when the last underpayment happened rather than on when the practice started.
The cheapest moment to fix it is before anyone asks. Correcting it forward costs the annual figure above. Correcting it after a claim costs the backdated figure plus the time.
Common questions
Does overtime have to be included in holiday pay?
Where it is regular enough to count as normal pay, yes, for four of the 5.6 weeks. The remaining 1.6 weeks can be at basic.
How regular does overtime have to be?
There is no statutory number. It has to be settled and habitual enough to form part of normal earnings, judged over the 52 paid weeks before the holiday.
What reference period is used?
The 52 paid weeks before the holiday. Skip unpaid weeks and look back up to 104 weeks to find 52 paid ones.
How far back can someone claim?
Generally two years in Great Britain, and a gap of more than three months between deductions can break the series.
Related calculators
Is this happening in your business?
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