Holiday pay can throw a real spanner in the works for hospitality businesses’ cashflow. You may find yourself hit with big, unexpected bills when several team members take time off at once because you’re paying your regular staffing amount plus holiday pay.
‘Most employers don’t accrue for holiday pay when completing their management accounts, meaning their holiday payout months are distorted,’ explains Carroll Accountants director David Burr. ‘It can cause budget discrepancies.’
That’s why the return of rolled-up holiday pay from April 2024 is welcome news. It offers a way to spread holiday costs evenly across the year, helping hospitality businesses avoid sudden cashflow dips.
What is Rolled-Up Holiday Pay?
Rolled-up holiday pay means workers receive their holiday pay alongside their usual wages, rather than when they actually take their holiday leave. In other words, instead of saving holiday pay for later, it’s ‘rolled up’ into their regular pay packet.
Employers must show holiday pay as a separate line on the payslip, and it’s calculated at 12.07% of total pay.
This approach was previously banned, but the government has now brought it back — with some important rules attached.
Who Can Receive Rolled-Up Holiday Pay?
Not every employee is eligible. Rolled-up holiday pay applies only to:
● Irregular hours workers, such as bar staff who work different shifts each week.
● Part-year workers, such as seasonal waiting staff or summer beer garden workers.
It’s still unlawful to use rolled-up holiday pay for staff with regular, fixed hours. Examples could include:
● A full-time chef who works a standard 40-hour week on set shifts.
● A salaried restaurant manager contracted to a fixed schedule each week.
That means that your cashflow planning should account for holiday pay for these workers when they actually take their time off.
How Rolled-Up Holiday Pay Works
Where does the 12.07% figure come from? UK workers are entitled to 5.6 weeks’ statutory holiday. So 12.07% comes from dividing 5.6 weeks by the remaining 46.4 working weeks in the year.
Here’s an example:
● A bartender earns £400 in a week.
● Rolled-up holiday pay = £400 × 12.07% = £48.28.
● Total gross pay that week = £448.28, with holiday pay clearly shown on the payslip.
● The next week, the bartender goes on holiday. She will not receive any pay for the week they are out.
Why Rolled-Up Pay Holiday is Beneficial for Hospitality Businesses
Payroll is often one of the trickiest parts of running a pub, bar, or restaurant. Rolled-up holiday pay can ease some of that pressure.
Simplified Budgeting
Facing unpredictable staffing costs? If three team members decide to take their holiday in the same month, your wage bill suddenly shoots up — even if trading is quieter at that time. With rolled-up holiday pay, holiday entitlement is paid evenly across the year as part of wages. This flattens out peaks and troughs, making it easier to forecast your outgoings and keep cashflow under control.
Operational Ease
Many pubs and restaurants rely heavily on casual or seasonal workers whose hours change from week to week. Tracking and accruing holiday balances for this group can be a complex, time-consuming task. Rolled-up holiday pay removes much of that admin: instead of having to manage and schedule holiday accruals, you simply pay the 12.07% each pay period and record it on payslips.
Recruitment and Retention Advantage
As you know, sometimes it’s hard to fill those front-of-house and kitchen roles. Rolled-up holiday pay means staff see a slightly higher amount in their pay packet each week. Not all workers prefer rolled-up holiday pay, but many do. So it can make your establishment more appealing in a competitive jobs market. And because the system is straightforward, it may also help reduce disputes or confusion about holiday entitlement — which in turn supports staff satisfaction.
Better Alignment with Seasonal Business Patterns
Our industry faces sharp seasonal swings in demand — think summer beer gardens, Christmas parties, or sports events. Rolled-up holiday pay can help smooth out the impact of holiday costs during peak and quieter seasons, so you’re not left short-staffed or facing sudden spikes in payroll when staff take time off after a busy period.
Additional Compliance Considerations
Before implementing rolled-up holiday pay, there are several legal compliance issues you should be aware of.
Seek Advice About Your Employees’ Contracts
In employment law, changing pay arrangements can count as a ‘variation of contract’. If your employment contracts currently say holiday pay is given when time off is taken, you’ll either need the workers to agree to the variation or follow a proper consultation process.
What happens if you skip this step and just start rolling up holiday pay without updating contracts? You could face:
● disputes over unpaid holiday.
● claims for breach of contract.
● reputational damage with staff.
Check with HR or your legal team to find out if contracts need to be updated before making any changes to the terms of payment.
Stay Above National Minimum Wage
Rolled-up holiday pay cannot reduce a worker’s basic pay below the National Minimum Wage (NMW). In other words, you cannot count the rolled-up holiday pay towards meeting the minimum wage. It must be paid on top of the minimum wage, not instead of it.
For example, suppose a 22-year-old bar worker works 20 hours in one week. As of 1 April 2025, the NMW for workers over 21 is £12.21 per hour. That means you must pay her the hourly rate plus 12.07% holiday pay.
● Basic pay: 20 hours × £12.21/hour = £244.20
● Rolled-up holiday pay (12.07%): £244.20 × 12.07% = £29.48
● Total gross pay that week: £244.20 + £29.48 = £273.68
Show Holiday Pay
Separately on Payslips
When using rolled-up holiday pay, employers are legally required to show it as a distinct line on the payslip. This serves several important purposes:
Transparency for staff: Workers can see exactly how much of their pay relates to holiday entitlement. This ensures staff understand they are still receiving their statutory holiday pay, even though it’s paid alongside their normal wages.
Avoiding underpayment: By itemising the rolled-up element, both employer and employee can check that the correct 12.07% is being applied. Without a separate line, it’s easy for mistakes or underpayments to slip through unnoticed.
Compliance protection: HMRC and employment tribunals take a dim view of employers who hide or misrepresent pay. Clearly showing rolled-up holiday pay demonstrates that you are following the rules and paying holiday pay properly, on top of the National Minimum Wage.
Encouraging Leave: ACAS notes that using rolled-up holiday pay may discourage some staff members from using time off. As an employer, it’s your responsibility to encourage staff to take time for rest and wellbeing. A clear payslip reminder reinforces that holiday pay is part of their entitlement, not a discretionary bonus.
Final Word
The return of rolled-up holiday pay is good news for hospitality employers. It offers a simpler, more predictable way to handle holiday pay — but only if it’s done properly.
At Carroll Accountants, we specialise in supporting pubs, bars, and restaurants. We can help you implement rolled-up holiday pay in a way that works for your business and keeps you compliant.
Book a consultation today to find out how we can help.