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HMRC internal manual

National Insurance Manual

Earnings Periods: Accrued holiday pay entitlement on leaving employment

On leaving employment, an employee may get accrued holiday pay, eg so much for eachmonth they have been with the employer in a 12-month period.

Contract ends on last day at work

If the employee’s contract of service ends at the time they stop work (whether ornot they then take a holiday), the employer should not treat the accrued pay as holidaypay. The employer must:

  • treat it as an additional payment and add it to the employee’s pay for their final week or month, if monthly paid; and
  • calculate the NICs on the total using the appropriate table.


If an employee, on leaving employment, receives their final 2 weeks’ ordinarywages, together with an amount representing their accrued holiday pay entitlement (but notranking as holiday pay because of the ending of the employment) aggregate the latteramount with whichever of the payments of ordinary wages for the final 2 weeks wouldnormally fall to be paid in that tax week.

Contract ends later than last day at work

If the contract continues until the employee has had a period of holiday afterfinishing work, the employer should regard the additional payment as holiday pay and treatit as such. The basis of this distinction is that a person cannot be on holiday from anemployment after that employment has ended.

Payments made after State Pension Age

The normal rules apply to holiday payments made after State pension age, see NIM36000.