Holiday pay when an employee leaves: payment in lieu of untaken leave

Where this applies: Great Britain (England, Wales and Scotland). The regulations below are marked as extending to England, Wales and Scotland on legislation.gov.uk. Northern Ireland has separate holiday rules and is not covered. Not legal advice.

Statutory annual leave can only be swapped for money when employment ends. Regulation 13(9)(b) of the Working Time Regulations 1998: leave “may not be replaced by a payment in lieu except where the worker’s employment is terminated”, and regulation 13A(6)(a) has the same exception for the additional 1.6 weeks. GOV.UK: “The only time someone can get paid in place of taking statutory leave (known as ‘payment in lieu’) is when they leave their job. Employers must pay for untaken statutory leave, even if the worker is dismissed for gross misconduct.”

Which rule applies depends on the worker. Regular-hours workers are under regulation 14. Irregular-hours and part-year workers, in leave years beginning on or after 1 April 2024, are under regulation 15E.

Regular-hours workers: regulation 14

When it applies: reg 14(1): employment “is terminated during the course of his leave year” and the proportion of leave taken “differs from the proportion of the leave year which has expired”.
The duty: reg 14(2): “Where the proportion of leave taken by the worker is less than the proportion of the leave year which has expired, his employer shall make him a payment in lieu of leave”.
How much: reg 14(3): the sum set by a relevant agreement or, if none applies, the amount due under regulation 16 (a week’s pay for each week of leave) for a period of leave worked out by the formula (A × B) − C, where “A is the period of leave to which the worker is entitled under regulation 13 and regulation 13A; B is the proportion of the worker’s leave year which expired before the termination date, and C is the period of leave taken by the worker between the start of the leave year and the termination date.”
Leave carried over from an earlier year: reg 14(6): if the worker still has leave “carried forward under paragraph (14), (15) or (17) of regulation 13 or paragraph (7) or (7A) of regulation 13A”, the employer must make a payment in lieu “equal to the sum due under regulation 16 for the period of untaken leave”. See carrying over holiday.

Our own illustration, not a figure from the legislation or GOV.UK: a worker on 37.5 hours a week is entitled to 210 hours a year (5.6 weeks, which is also the 28-day cap at 7.5 hours a day). The leave year runs from 1 January 2026 and they leave on 30 June 2026, so 180 of the 365 days expired before the termination date. A × B = 210 × 180 / 365 = 103.6 hours. They have taken 80 hours, so C = 80 and the payment in lieu covers 23.6 hours at the regulation 16 rate (see the 52-week average).

Irregular-hours and part-year workers: regulation 15E

When it applies: reg 15E(1): to a worker “to whom regulation 15B applies, in respect of any leave years beginning on or after 1st April 2024”.
The duty: reg 15E(2): where employment ends during the leave year and the worker “has not taken all the annual leave to which they are entitled under regulation 15B(2), the worker’s employer must make the worker a payment in lieu of that untaken leave”. There is no (A × B) − C formula: the leave has already accrued at 12.07% of hours worked (see 12.07% accrual).
How much: reg 15E(3): the sum set by a relevant agreement or, if none applies, “the amount that would be due under regulation 16 in respect of the untaken leave”.
Rolled-up holiday pay: reg 15E(5): the duty “does not apply if the worker has in respect of the untaken leave … been paid in the way described in regulation 16A” (see rolled-up holiday pay).

When the worker has taken more than their share

Reg 14(4) and reg 15E(4): a relevant agreement may provide that the worker compensates the employer, “whether by a payment, by undertaking additional work or otherwise”. GOV.UK: “their employer must not take money from their final pay unless it’s been agreed beforehand in writing.”

Starters: the first leave year

For a regular-hours worker who starts after their first leave year has begun (because a relevant agreement sets a fixed leave year), regulation 13(5) and 13A(5) give “a proportion … equal to the proportion of that leave year remaining on the date on which his employment begins”. Someone who joins and leaves in the same leave year starts from that reduced entitlement.

Records

Since 6 April 2026, regulation 16B requires records adequate to show compliance with, among others, “the requirements in regulations 14(2) and (6) and 15E(2)”, kept for six years. See holiday records from 6 April 2026.

What Leaveproof does

Reads a leaving date from your payroll export once you map the “Employment end (leaving) date” column, and a start date for joiners.
Pro-rates the entitlement of regular-hours workers to the days employed in the leave year, and for irregular-hours and part-year workers uses the 12.07% accrued in the year.
Shows “Payment in lieu due (h)” in the records pack for the leaver’s final leave year: entitlement or accrual, plus leave carried in, less leave taken. Each leaver is flagged with reg 14 or reg 15E, and a leaver paid rolled-up holiday pay is noted as having no payment in lieu due for that leave.
Flags a negative balance where more leave was taken than was due, for you to check against any relevant agreement.
Keeps it in a 6-year records pack per leave year (CSV and print-to-PDF), with the 52-week average hourly pay you need to value the hours.

Leaveproof reads a payroll export saved as CSV, one row per worker per pay period (or per pay item), plus the employer’s leave sheet if there is one. It is designed for exports from Xero Payroll UK and BrightPay, but their report columns are chosen by the user and have not been checked against every layout, so Leaveproof shows the columns it detected and asks you to confirm which is which before it works anything out. It remembers that choice for each employer. Any payroll software that can export pay periods, pay, hours and holiday columns to CSV can be used the same way.

What it doesn’t do, and approximations

It gives the payment in lieu in hours, not pounds. You value the hours at the regulation 16 rate.
It covers the statutory minimum only. Contractual leave above 5.6 weeks, and any sum set by a relevant agreement, are not modelled.

Try it on your own payroll export. Free, no account or sign-up, nothing uploaded: it runs in your browser. The Free plan covers one employer and the first 5 workers (by worker ID) in the records pack and exceptions. Standard ($19 per month or $190 per year) covers every worker for one employer; Bureau ($49 per month) covers any number of employers: see pricing.

Make a records pack

More guides

Not legal advice. This guide summarises the statutory minimum rules in the Working Time Regulations 1998 as they apply in Great Britain (England, Wales and Scotland), checked against legislation.gov.uk and GOV.UK on 27 October 2026. Contracts, collective agreements and individual cases can change the answer; take advice on a specific case. Leaveproof is independent and not affiliated with or endorsed by Xero or BrightPay. Xero is a trademark of Xero Limited; BrightPay is a trademark of Bright Software Group.