Bank holidays and pay: everything you need to know

Getting to grips with the entitlement and employment laws surrounding bank holidays is important for small business owners.

While bank holidays prompt images of beer gardens and day trips for many, for employers they can be a bit of a headache.

Whether your employees are entitled to the day off and to be paid for the day, and how bank holidays work for full and part-time staff, are all things you need to consider and create a policy on.

Let’s take a look at bank holidays and how to navigate them as a small business owner.

What is a bank holiday, as opposed to a public holiday?

Bank holidays are national days of holiday that are traditionally observed throughout the UK.

They get their name from the fact that banks would traditionally close on these days, as would various other businesses.

Examples of bank holidays in England include the summer bank holiday on the last Monday of August, and the early May bank holiday on the first Monday of May, sometimes known as May Day.

Public holidays, meanwhile, are holiday days on significant cultural or religious days such as Christmas Day and Boxing Day, or Good Friday and Easter Monday.

While public holiday dates will be the same throughout the UK, bank holidays can vary between England, Scotland, Wales and Northern Ireland, so it’s important to familiarise yourself with the specific bank holiday dates for your region.

What’s the legal entitlement for bank holiday pay?

Whether or not your employees are entitled to bank holidays off work is all down to you as their employer.

There’s no legal requirement to grant bank holidays to your staff, nor is there any legal requirement to pay them extra if they do work a bank holiday.

This often comes as a surprise to both employers and employees alike, as many wrongly believe that they are automatically entitled to a day off on bank holidays.

Whether or not you decide to grant your staff bank holidays off, or if you decide to offer them perks for working on bank holidays, such as extra pay or a day off in lieu, it will need to be clearly stated in their employment contract.

You could also choose to implement a flexible bank holiday policy, which enables employees to swap government-set bank holiday dates for time off on dates of their choosing.

Payroll and contract considerations

Working or not working on bank holidays can mean different things for different employees, and there are various things you need to consider as an employer.

Part-time staff

Getting to grips with bank holidays for part-time staff can be tricky. Although there is no legal requirement to offer staff bank holidays off, part-time staff have the legal right to be treated just as favourably as full-time employees.

This means that if they work regular hours, you will need to offer them prorated bank holidays, in line with the full-time requirement – if you are offering bank holidays to full-time employees.

For example, you may offer a part-time employee the equivalent of four out of eight bank holidays.

When you write up the employment contract for your part-time employees, remember to clearly state whether or not they will be entitled to bank holidays in addition to their holiday allowance.

Holiday entitlement

In your full-time employees’ contracts, you’ll need to be clear about exactly how many days of holiday they will be entitled to take.

Some employers offer bank holidays in addition to holiday allowance, in which case a contract will state, for example, “25 days holiday plus bank holidays”.

Others will decide to include bank holidays within the allowance, stating something along the lines of “27 days holiday including bank holidays” in a contract.

The important thing is to be consistent with all of your employees when it comes to holiday allowance, and how you incorporate bank holidays into this. Remember, full-time UK workers are legally entitled to a minimum of 5.6 weeks of annual leave. This should be pro-rated for part-time employees.

Time off in lieu

Some employers opt for a time off in lieu (TOIL) approach to working bank holidays. This is when you expect an employee to work on a bank holiday, but they will then take a day off at a later point to make up for it.

This is a common practice in retail environments where many shops remain open on bank holidays and therefore need workers on shift.

Extra pay

When it comes to working bank holidays, you may also decide to pay your staff overtime or “time and a half”.

Legally, there is no obligation to pay an employee any extra than their usual wage for working on a bank holiday. Many employers opt to do so, especially on major holidays such as Boxing Day, as a gesture of goodwill to their staff and to boost the organisation’s culture

Additional bank holidays

On rare occasions, the UK government may announce an additional bank holiday.

For example, in September 2022, an additional bank holiday was announced to mark the funeral of Queen Elizabeth II, followed by another on 8 May 2023 to mark the coronation of King Charles III. More recently, the Liberal Democrats led (unsuccessful) calls for an additional bank holiday on 15 July 2024 if England were to win the UEFA Euro final.

Like standard bank holidays, there is no legal requirement to grant these additional days off to employees – instead, you will need to consult their contracts.

If a work contract states that an employee is entitled to “all bank holidays”, you will also need to honour any new or last-minute bank holidays that are announced by the government.

Even if work contracts don’t explicitly state that an employee is entitled to take off an additional bank holiday, many employees will opt to grant them to prioritise staff relations and morale.

Final thoughts 

How you navigate bank holidays is ultimately up to you as an employer, but you’ll want to think carefully about the impact bank holidays could have on both your company profits and your relationships with your staff. Whatever you decide, make sure it’s clearly stated in all employee contracts to avoid unwanted stress further down the line.