Statutory pay-in-lieu on leaving
Employer MUST pay for unused statutory holiday (5.6 weeks / 28 days FTE) at:
((statutory entitlement × months worked) / 12) - days taken) × daily rate
Worked example
Full-time 5-day worker, leaves 30 September (6 months served): - Statutory entitlement: 28 days annual - Pro-rata for 6 months: 14 days - Days taken: 5 days - Unused: 9 days - Daily rate at £30,000 salary: £30,000 / 260 = £115.38 - Pay in lieu: 9 × £115.38 = £1,038.46
Contractual holiday above statutory
Contract terms decide. Common patterns: - Pay in lieu of ALL untaken holiday (annual + contractual) - Pay in lieu of statutory only; contractual forfeit - Take all before leaving (encouraged during notice)
Check your employment contract or handbook.
Tax treatment
Holiday pay in lieu = taxable pay. PAYE + NI applied normally.
Exception — genuine redundancy: Some redundancy payments include unused holiday. First £30,000 of statutory redundancy tax-free; unused holiday within total may still be taxable pay.
What if I'm summarily dismissed?
Still entitled to statutory holiday pay in lieu, unless dismissal for gross misconduct AND contract explicitly forfeits contractual holiday for GM. Statutory holiday cannot be forfeited.
Overpaid holiday on leaving
If you've taken more holiday than accrued at leave date, employer can deduct from final pay — but only with written agreement (either in contract or specific consent).
In short
Statutory unused holiday = must be paid in lieu. Contractual above statutory = contract decides. Taxable as normal pay.