What Happens to Your Holiday When You Leave a Job
Leaving a job usually means one of two conversations about holiday: either you have days left and want paying for them, or you have taken more than you had earned and your employer wants some money back. Both are governed by the same short piece of law, and both are worth understanding before you hand in your notice rather than after.
The rule: you get paid for what you have accrued and not taken
Regulation 14 of the Working Time Regulations 1998 is the relevant provision. If your employment ends part way through a leave year and you have taken less leave than you had accrued by that point, your employer must make a payment in lieu.
The formula in the regulations is (A × B) − C, where:
- A is your annual leave entitlement
- B is the proportion of the leave year that had passed before your employment ended
- C is the leave you have actually taken in that leave year
This applies to statutory leave. Any contractual leave above the statutory 5.6 weeks is dealt with by your contract, which may say something different about what happens to it on termination.
A worked example
You work five days a week, your entitlement is 28 days, your leave year runs from 1 January, and your last day is 31 August. You have taken 12 days.
A = 28 days
B = 8 months of 12, so 0.6667
A × B = 18.67 days accrued
C = 12 days taken
Payment due = 6.67 days
On a salary of £32,000, a day is roughly £123 (using 260 working days a year), so the payment is about £820 before tax.
Two points on that. Employers commonly work in days for salaried staff and hours for hourly-paid staff, and either is fine as long as it is consistent. And the payment is treated as earnings, so Income Tax and National Insurance come off it in the normal way.
If your leave year runs from 1 January and you are entitled to 28 days, this is what you will have accrued by the end of each month.
| Last day falls at the end of | Days accrued |
|---|---|
| January | 2.33 |
| February | 4.67 |
| March | 7.00 |
| April | 9.33 |
| May | 11.67 |
| June | 14.00 |
| July | 16.33 |
| August | 18.67 |
| September | 21.00 |
| October | 23.33 |
| November | 25.67 |
| December | 28.00 |
Subtract the days you have already taken and that is the figure to check against your final payslip. Note that employers may round to the nearest half day or quarter day, and a contract can provide for rounding in the employer's favour on the contractual leave above the statutory minimum, but not below the statutory entitlement itself.
Taken more than you earned
This happens easily. Many employers let you take your full annual allowance from the start of the leave year, so someone who takes a fortnight in February and leaves in April has had considerably more leave than they accrued.
Here is the part people get wrong in both directions. Your employer can only recover that if there is a relevant agreement providing for it. In practice that means a term in your contract, or a written agreement, saying that overtaken leave will be recovered from your final pay. Regulation 14 explicitly allows such an agreement to say you will compensate the employer "whether by a payment, by undertaking additional work or otherwise".
No such clause, no deduction. An employer who takes it from your final payslip anyway may be making an unlawful deduction from wages.
Can your employer make you take Holiday during your notice?
Yes, generally. An employer can require a worker to take leave on particular days, provided they give the right notice: at least twice as long as the leave they want you to take. So to require five days of leave, they need to give ten days' notice.
Employers often do this so that the holiday is used up rather than paid out. It is lawful, and it is the reason a lot of people spend the last fortnight of their notice at home. What an employer cannot do is refuse to let you take your leave at all across the whole leave year, and they cannot force a worker who is off sick to take annual leave.
If you want to take leave during notice, the usual notice rules apply: you must give notice of at least twice the length of the leave you want. Your employer can refuse, but they have to do so by giving notice equal to the length of the leave requested plus one day.
Garden leave is not Holiday
Garden leave means you remain employed, on full pay, but are told not to attend work. It is not annual leave, and your holiday entitlement continues to accrue during it, unless your contract specifically says leave will be treated as taken during a garden leave period. Plenty of contracts do say exactly that, so it is another clause worth finding.
Leave you carried over
If you had leave carried over from a previous leave year, that has to be paid out too. Since the 2024 changes, where a worker has carried over leave and their employment ends before they take it, the employer must make a payment in lieu for it.
This matters particularly for anyone who had a long sickness absence and carried leave forward, or who was on maternity or other family leave. Those situations create carry-over rights, and the carried leave does not simply evaporate when you leave.
Redundancy, dismissal and resignation are treated the same
The reason your employment ended makes no difference to accrued holiday pay. Whether you resigned, were made redundant, or were dismissed, including for gross misconduct, you are entitled to be paid for statutory leave you had accrued and not taken. Holiday pay is not a reward for good behaviour, it is pay you have already earned.
Redundancy pay itself is a separate calculation and is not affected by your holiday balance.
Your final payslip: what to check
- The number of days paid. Work out (A × B) − C yourself and compare.
- The day rate used. For variable pay, holiday pay should be based on your average pay over the previous 52 paid weeks, not on the minimum wage or a basic rate.
- Any deduction for overtaken leave. If there is one, find the contract clause that allows it.
- Carried-over leave. Make sure it has been included.
- Bank holidays. If bank holidays form part of your 5.6 weeks and some fell during your notice period, check how they have been counted.
If It Is Wrong
Ask payroll in writing, with your own calculation attached. Getting a figure corrected before the P45 is issued is far easier than afterwards.
If it is not resolved, unpaid holiday pay can be claimed at an employment tribunal, either as an unlawful deduction from wages or under the Working Time Regulations. The time limit is three months less one day from the date the payment should have been made, and you must contact Acas for early conciliation first. That deadline is unforgiving, so do not let a dispute drift over the summer.
Before you get to that point, work out what you think you are owed with the holiday entitlement calculator and check the rules in the holiday entitlement guide. A clear, calculated figure resolves most of these disputes on its own.
This is general information rather than legal advice. For a specific dispute, speak to Acas or an employment solicitor.