Rolled-up holiday pay: what employers need to know about SSP and SMP
Since the reintroduction of rolled-up holiday pay for eligible workers, many employers have updated their payroll practices. While rolled-up holiday pay can simplify holiday pay administration, it’s important to understand how it interacts with statutory payments such as Statutory Sick Pay (SSP) and Statutory Maternity Pay (SMP).
Rolled-up holiday pay is paid alongside the employee’s normal wages, rather than when annual leave is taken. Although it represents payment for statutory holiday entitlement, it forms part of the employee’s taxable earnings at the time it is paid.
This has implications for statutory payment calculations:
- Statutory Sick Pay (SSP): Rolled-up holiday pay counts towards an employee’s earnings when assessing whether they meet the Lower Earnings Limit for SSP eligibility. However, once an employee is receiving SSP, rolled-up holiday pay should not continue to be paid for periods when no work is performed, as it relates to holiday accrued through work undertaken.
- Statutory Maternity Pay (SMP): Rolled-up holiday pay is included in gross earnings during the relevant eight-week calculation period used to determine average weekly earnings for SMP. This can increase an employee’s SMP entitlement if rolled-up holiday pay was received during that period.
Employers should ensure their payroll systems correctly identify rolled-up holiday pay and include it in average earnings calculations where required. Equally important is ensuring that rolled-up holiday pay is only paid in respect of hours actually worked and is clearly itemised on payslips, in line with current legal requirements.
As with any change to pay practices, reviewing payroll processes and ensuring compliance with statutory payment rules can help avoid errors and provide employees with the correct statutory entitlements. Should you require any assistance with rolled up holiday payments contact 121 HR Solutions on 0800 9995 121.
0800 9995 121 
enquiries@121hrsolutions.co.uk
Follow us
Connect with us
Like us
iPhone App
Client Vacancies
121 HR Blog