I had an amount of annual leave at the end of my contract and I want to determine the daily rate for payment in lieu of the untaken days of annual leave.

My employer initially paid half the rate that I expected, then made another payment at a rate close to my yearly salary divided by 260 days (52 weeks and 5 days a week).

I would like to request one of the two daily rates below and find the legal basis for it:

  • salary divided by 230, to account 30 days of annual leave entitlement into account

  • salary divided by 222, as above, and also bank holidays (8 per year in the UK).

No details in employment particulars

I checked the Employment Rights Act of 1996 and it requires details on the rate for payment in lieu of leave:

1 Statement of initial employment particulars.


 (4) The statement shall also contain particulars, as at a specified date not more than seven days before the statement (or the instalment containing them) is given, of—


  (d) any terms and conditions relating to any of the following—

   (i) entitlement to holidays, including public holidays, and holiday pay (the particulars given being sufficient to enable the employee’s entitlement, including any entitlement to accrued holiday pay on the termination of employment, to be precisely calculated),

My offer letter does not include these details and I have no other legal documents.

Scenario for "payment in lieu"

Consider the following scenario. For simplicity, let's assume:

  • my contract had 24 days of annual leave (2 per month)
  • a month has 20 working days
  • I left my employer on the last day of September
  • I had 18 days left of annual leave to take

I could either (i) have requested a payment in lieu for the annual leave; or (ii) let the contract extend to cover the 18 days of leave. I think that "payment in lieu" means that my gross payment should be the same in both cases (net payment differs depending on the monthly tax-free allowance in the UK, but that's between me and the taxperson). In case (ii) I could have extended the contract by 20 days to cover the full month of October: for 18 of those days, I would have taken leave from my stock at the end of the contract; for the other 2 days, I would have taken leave accrued by being on payroll during the month of October.

If October had a bank holiday, then I would still have had one day of annual leave at the end of October.


  • am I right in my understanding of "payment in lieu" in the above scenario?

  • which of the daily rates at the top of the post should I request?

  • is there a legal basis for such a request?

2 Answers 2


am I right in my understanding of "payment in lieu" in the above scenario?

No. You are not being “paid in lieu” of anything; you are being paid your accrued entitlement. Payment in lieu refers to payment instead of some other obligation. In employment it usually refers to an employer paying an employee instead of requiring the employee to work out the notice period

which of the daily rates at the top of the post should I request?

Neither. The correct rate is the one your employer used - your annual rate divided by the number of days you get paid for. Annual leave continues to accrue while you are on annual leave (or any other paid leave).

is there a legal basis for such a request?



With a normal five day week, your annual salary is for quite exactly 260 days. You get paid the same for days that you work as for days that are holiday.

Let's say you have 12 days of holidays not taken. Then you should get (annual salary divided by 260) for each holiday you didn't take. If you took more holiday than you were entitled to at the time, then the same amount can be taken from your final salary.

You don't get paid salary for 230 days and 30 days unpaid holiday. If you did that would be fatal for you because you wouldn't get anything for the holiday you didn't take.

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