Essential Rules for Managing Staff Holidays

Getting Holidays Right: What Every Salon Manager Needs to Know!

Last updated: August 2026

Staff holidays. They sound simple enough… until you’re knee-deep in calendars, lost applications, upset employees and pay queries. From figuring out entitlements to calculating holiday pay on variable hours and commissions, it’s one of the easiest areas to get wrong. And unfortunately, one of the costliest when it comes to compliance.

This guide covers holiday entitlement and pay rules in England, Scotland and Wales. Different employment legislation applies in Northern Ireland.

Days or Hours – Which Should You Use?

First, how should you track holiday, in days or hours? That depends entirely on how your team works:

  • Fixed-length shifts? Managing holidays in days usually works well.
  • Hourly pay or variable shift lengths? Managing holidays in hours is far more accurate and fairer.

Tip: Match your tracking method to how your team actually works. It’ll save you endless confusion down the line.

How to Calculate Holiday Entitlement

Once you’ve decided how to track leave, you need to know how much each person is entitled to. 

The UK’s statutory minimum is 5.6 weeks of paid holiday per year. Here’s how that translates:

  • 5 days per week × 5.6 = 28 days
  • 40 hours per week × 5.6 = 224 hours

For irregular-hours and part-year workers, statutory holiday generally accrues at 12.07% of the hours worked in each pay period. This applies to leave years beginning on or after 1 April 2024.

Does Overtime Affect Holiday Entitlement or Holiday Pay?

Overtime can affect holiday entitlement and holiday pay in different ways.

For regular-hours workers, overtime does not automatically give them more holiday. However, employers can choose to let them accrue additional leave on overtime worked. If overtime is worked regularly, those earnings must also be included when calculating their holiday pay.

Loop HR makes it easy to provide this additional leave and includes regular overtime earnings when calculating holiday pay.

For irregular-hours workers—recorded as zero-hour contracts in Loop HR—holiday entitlement is calculated as 12.07% of the hours worked in each pay period.

For Time Off In Lieu (TOIL): the employee receives time off for hours already worked. Loop HR manages, tracks and reports all Banked Overtime and TOIL.

Loop HR applies the appropriate calculations based on each employee’s working arrangements and maintains a clear record of how their entitlement and holiday pay were calculated.

Should Commission and Bonuses Be Included in Holiday Pay?

Commission is where many salons get caught out.

For regular-hours workers, at least four weeks of statutory leave must reflect their normal earnings. This can include:

- Basic pay
- Commission
- Regular overtime
- Performance bonuses directly linked to the employee’s work
- Payments linked to professional qualifications or length of service

In Loop HR, performance bonuses used instead of commission are included in the holiday pay calculation. Other payments, such as team or manager bonuses, may be excluded where they do not form part of the employee’s normal remuneration.

Where average pay is required, the calculation generally uses the previous 52 paid weeks. Weeks with no pay are excluded, looking back up to 104 weeks where necessary.

The remaining 1.6 weeks may legally be paid at the basic rate. Loop HR applies commission and qualifying performance pay across all 5.6 weeks, ensuring every week of statutory leave is treated consistently and fairly.

What About Starters and Leavers?

For new starters:

You’ll need to pro-rate their allowance from their start date to the end of your holiday year. Make sure they know both their full-year entitlement and their pro-rata amount.

For leavers:

  • Calculate their entitlement from the start of the year (or their start date) to their final day.
  • Deduct any holiday they’ve already taken.
  • Pay them for any accrued but unused holiday, using the holiday-pay calculation that applies to their working and pay arrangements.
  • If they’ve taken too much, you can reclaim the overpayment – but only if it’s stated in their contract.

Loop HR takes care of this automatically and includes everything in the final payroll summary.

 

New Holiday Record-Keeping Rules

Since 6 April 2026, employers in Great Britain must keep adequate records demonstrating that they have complied with statutory annual leave and holiday pay requirements.

These records should clearly evidence:

The holiday each worker has accrued and taken
Any holiday carried forward
The holiday pay they received
How that holiday pay was calculated
Any payment made for untaken leave when employment ends
Each record must be retained for six years from the date it was created. Employers can choose how the records are created and stored, but they must be sufficient to demonstrate compliance.

Failure to keep adequate records can be a criminal offence, punishable by an unlimited fine.

Loop HR records every holiday pay calculation, giving you clear evidence and access to your historical data.

What Does Good Holiday Management Look Like?

Here's what we recommend:

  • Provide at least 5.6 weeks of statutory leave
  • Use the correct accrual method for each worker
  • Include commission and other normal remuneration where required
  • Use the correct 52-week reference period when average pay is needed
  • Treat bank holidays consistently
  • Maintain adequate records for at least six years
  • Have a clear and accessible holiday policy
  • Give employees live access to their allowance and holiday calendar
  • Use a system that updates entitlement, pay and records in real time (Loop HR)

Final Thoughts

For your team, holidays are easy to understand and transparent.
For you, everything, from starters and leavers to commission-based pay and legal compliance, is handled automatically.

Everything is tracked, calculated and reported clearly—including the records needed to evidence how holiday entitlement and pay were handled.

If you’d like to see how Loop HR works for your business, book a private call and I’ll show you around. Use this link to book.

Ian Egerton

Founder, Loop HR

 

Our approach to employment law

Loop HR specialises in applying employment law to practical people management. For UK users, the platform applies the relevant rules using legislation and publicly available guidance from authoritative sources, including GOV.UK and Acas.

For users outside the UK, Loop HR can be configured to reflect the holiday entitlement and pay rules that apply to their business.

This article provides general information and should not be treated as individual legal advice. Specialist advice may be required in complex cases.