NIM09170 - Earnings Periods: Accrued holiday pay entitlement on leaving employment

On leaving employment, an employee may get accrued holiday pay, eg so much for each month 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 or not they then take a holiday), the employer should not treat the accrued pay as holiday pay. 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’ ordinary wages, together with an amount representing their accrued holiday pay entitlement (but not ranking as holiday pay because of the ending of the employment) aggregate the latter amount with whichever of the payments of ordinary wages for the final 2 weeks would normally 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 after finishing work, the employer should regard the additional payment as holiday pay and treat it as such. The basis of this distinction is that a person cannot be on holiday from an employment 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.