For ACS compliance, this is important. Holiday pay is one of the most misunderstood employment obligations in the security industry — and one of the most expensive to get wrong. With guards working irregular hours, split shifts, and variable weekly patterns, calculating what they are owed is rarely straightforward. Yet the consequences of under-paying holiday can be severe: tribunal claims, backdated arrears, and HMRC scrutiny.
This guide explains the rules as they apply to security companies in 2025, covers the common errors, and explains how to manage holiday pay accurately at scale.
The Statutory Entitlement
All UK workers — not just employees — are entitled to 5.6 weeks of paid annual leave per year. For a worker on a standard 5-day week, that equates to 28 days. For part-time workers, it is calculated pro-rata.
The 5.6 weeks comprises two components:
- 4 weeks under the Working Time Regulations 1998 (derived from the EU Working Time Directive)
- 1.6 weeks under the Employment Rights Act 1996
This distinction matters because the rules for calculating pay differ between the two portions — a complexity that many security companies are unaware of.
How Holiday Pay Is Calculated for Variable-Hours Workers
Security guards rarely work the same hours every week. Shift patterns change, overtime is common, and many guards work across multiple sites. This variability makes holiday pay calculation more complex than for salaried office workers.
For workers with irregular or variable hours, the holiday pay calculation uses a 52-week reference period. You take the worker’s average weekly pay over the 52 weeks before the leave is taken (ignoring any weeks where no pay was received, up to a maximum of 104 weeks back).
Crucially, “average weekly pay” for this purpose includes:
- Regular overtime (both compulsory and voluntary if worked regularly)
- Commission payments (where these are part of normal remuneration)
- Shift allowances and premiums paid as part of normal working
This was established by the Supreme Court in the 2014 case Bear Scotland v Fulton and confirmed in subsequent Employment Tribunal decisions. Pay basic rate only for holiday, and you are almost certainly under-paying your guards.
The 12.07% Method — and Why It Is No Longer Reliable
Many security companies — and many payroll providers — use the 12.07% accrual method as a shorthand for calculating holiday pay for casual or zero-hours workers. The figure comes from dividing 5.6 weeks by 46.4 weeks (the remaining working weeks in a year).
HMRC guidance and Employment Tribunal cases have confirmed that this method is not appropriate for workers who work regular or consistent patterns. It remains acceptable for genuinely casual workers who have no regular pattern of work, but it should not be used as a blanket approach.
If your guards work consistent weekly patterns — even if the hours vary — the 52-week reference period method is the correct approach and offers stronger legal protection.
Rolled-Up Holiday Pay
Rolled-up holiday pay — adding an additional percentage to every pay packet in lieu of holiday — was ruled unlawful under EU law in the 2006 case Robinson-Steele v RD Retail Services. The principle is that holiday pay should be paid when leave is actually taken, not in advance.
For companies that retained rolled-up pay arrangements, there is now an additional complication. Following the UK’s departure from the EU, the government confirmed in 2023 that rolled-up holiday pay would be permissible for irregular-hours workers and part-year workers from 1 April 2024 onwards, under the amended Working Time Regulations.
However, this applies only to irregular-hours or part-year workers (as defined in the amended regulations), and the rate must be 12.07% of earnings in the pay period. It does not apply to workers with regular patterns. If you are considering using rolled-up pay, take advice before implementing it.
Common Mistakes Security Companies Make with Holiday Pay
- Paying basic rate only. If a guard regularly earns shift premiums or overtime, their holiday pay must reflect their normal pay, not just their basic rate. This is the most widespread error in the industry.
- Using 12.07% for all workers. As noted above, this is not appropriate for workers with consistent working patterns.
- Failing to track accrual correctly. Guards who work irregular patterns should have their accrual tracked based on actual hours worked. Systems that apply a flat accrual rate regardless of hours will produce errors.
- Allowing holiday to roll over incorrectly. Workers generally cannot carry over unused holiday beyond the end of the leave year unless there is a contractual provision — or unless they were unable to take it due to illness or another statutory reason. Unlimited rollover can create a significant liability.
- Not paying out accrued holiday on termination. When a guard leaves, they are entitled to a payment in lieu of any untaken statutory holiday accrued in the current leave year. Failing to pay this is a breach of contract and a statutory entitlement.
Backdated Claims: Understanding the Risk
Workers who have been underpaid on holiday can bring a claim for unlawful deduction from wages in the Employment Tribunal. Following the Supreme Court ruling in Chief Constable of Northern Ireland Police v Agnew (2023), there is no longer a two-year cap on how far back a series of deductions can be claimed. In practice, this means that if you have been consistently underpaying holiday, a claim could span the entire period of underpayment.
For a 150-guard company where each guard has been underpaid by £300 per year for three years, that is a potential liability of £135,000 — before legal costs.
Managing Holiday Pay Accurately at Scale
For security companies managing dozens or hundreds of guards on variable hours, manual holiday pay calculation is not feasible. The calculation is data-intensive, legally complex, and changes with every shift pattern adjustment.
The practical solution is a workforce management platform that:
- Tracks actual hours worked per guard (not contracted hours) as the basis for accrual
- Calculates average weekly pay using the 52-week reference period, including overtime and allowances
- Maintains an accurate holiday balance for every guard, updated in real time as shifts are worked and leave is taken
- Flags guards who are approaching the end of the leave year with untaken leave — giving you the opportunity to manage the liability proactively
- Produces an accurate payout calculation when a guard leaves
TacDesk’s holiday accrual module does all of this automatically. Statutory entitlements are tracked based on actual shift data, accrual is calculated using the correct reference period, and balances are visible in real time. When leave is approved and taken, the system updates balances automatically.
Practical Steps to Review Your Current Position
If you are not confident that your holiday pay calculations are correct, here is where to start:
- Audit your guard contracts. Are guards classified as employees, workers, or genuinely self-employed? The holiday pay rules apply to employees and workers — not to the genuinely self-employed (though HMRC will scrutinise self-employed status in the security industry).
- Review your calculation method. Is your payroll team using basic rate only, 12.07%, or the 52-week average? Get clarity on which method is being applied to which workers.
- Check whether overtime and allowances are included. Run a sample calculation for a guard who regularly earns overtime and compare what they actually received in holiday pay with what the 52-week average would produce.
- Assess your rollover position. Do you have guards with significant accrued but untaken holiday? Understand the liability before year-end.
- Take legal advice if in doubt. Employment law in this area is evolving. If you have material uncertainty about your position, the cost of an employment law review is likely to be significantly less than the cost of a tribunal claim.
Summary
Holiday pay for security guards is more complex than it appears, and the cost of getting it wrong has increased significantly following recent case law. For security companies with variable-hours workforces, the core obligations are: use the 52-week average pay reference period, include regular overtime and premiums in the calculation, track accrual accurately, and pay out correctly on termination.
The simplest way to manage this at scale is with a workforce platform that does the calculation automatically from real shift data.
TacDesk’s holiday accrual module handles statutory entitlement tracking automatically for every guard. See all TacDesk features.