Short answer: often, yes. If someone regularly earns overtime or commission, their holiday pay should usually reflect it for most of their holiday. Paying basic pay only is one of the most common holiday pay mistakes I see in small businesses and it's an easy one to put right.
Why basic pay isn't always enough
The idea behind holiday pay is that nobody should be put off taking a break because they'd lose money. If one of your team earns an extra £80 most weeks from overtime, paying them only their basic rate when they're on holiday means they'd be worse off for resting. That's exactly what the law is designed to stop.
What counts as "normal" pay
For at least 4 of the 5.6 weeks of statutory holiday, workers should be paid their normal pay. According to GOV.UK, normal pay includes regular overtime, commission and payments linked to length of service or professional qualifications. Bonuses don't usually count. The remaining 1.6 weeks can be paid at the basic rate for staff with regular hours, although many employers simply use normal pay for all of it to keep payroll simple.
The key word is regular. Overtime that someone works most weeks should be included and so should commission they earn month after month. A one off weekend of overtime last spring probably wouldn't be.
How to work it out
When pay varies, holiday pay is based on average pay. Add up the gross pay someone received over the last 52 weeks in which they were paid and divide by the number of weeks to get an average week's pay. Skip any weeks with no pay and go back no more than 104 weeks. If they've worked for you for less than a year, use the full weeks they have worked.
Say someone earned £28,600 over the last 52 paid weeks including overtime. Their average week is £550, which is £110 a day over five days. A week off should be paid at £550, not just their basic £480.
Four things to check in your payroll
- Is overtime included? Check your payroll software actually adds regular overtime and commission into holiday pay rather than paying basic salary.
- Are you counting the right weeks? Weeks with no pay should be skipped so they don't drag the average down.
- Does it apply to leavers too? Payment for untaken holiday when someone leaves should use the same normal pay figure.
- Can you show your workings? Employers must keep holiday pay records for six years from April 2026 and the Fair Work Agency can now check holiday pay without anyone making a claim.
Let the calculator take the strain
Our free holiday pay calculator works out average holiday pay from the last 52 paid weeks and shows the result in both hours and money. If you're dealing with a leaver, read how to calculate holiday pay for leavers. For casual staff, see the 12.07% rule.
If you'd like someone to check your holiday pay is right before it becomes a problem, book your free 30 minute HR chat. Consider it one less thing on your plate.
This article is general guidance rather than legal advice and reflects the law at the date of publication. Source: GOV.UK: holiday pay.