Holiday Pay For Zero Hour Employees

Carole Stephens
• Sunday, 16 May, 2021
• 7 min read

The easiest way to calculate holiday entitlement is as it accrues, meaning your staff earn holidays based on the number of hours they work. The statutory holiday entitlement of 5.6 weeks is equal to 12.07% of the total hours worked in a year.

holiday pay hours zero contracts employment law
(Source: www.elliswhittam.co.uk)


That means you owe your employee around 1 hour and 12 minutes holiday leave. Once you know your staff’s holiday entitlement, you can work out how much holiday pay to give them.

Workers do get holiday pay on zero hours contracts, and it’s your responsibility to make sure you pay them what you owe. You could then end up paying out thousands if the tribunal rules in your employee’s favor.

In practice, a zero hour contract is used to describe various different types of casual agreements used by employers in need of an accessible pool of workers in response to fluctuating demand or temporary staff shortages. The worker will also begin to accrue paid holiday entitlement as per the statutory minimum requirement.

In the context of zero hour contracts, the sporadic nature of these working arrangements can very often mean that there are gaps in the worker’s employment, breaking the continuity of service for the purposes of accruing greater statutory rights. In some cases, the worker may also have enhanced contractual rights that provide for a higher rate of pay, or greater paid holiday entitlement, than the statutory minimum in any event.

For a full time employee working fixed hours five days a week, this equates to a total of 28 days, although an employer can include bank holidays and public holidays as part of an individual’s statutory leave entitlement. Further, the worker has no automatic right to carry over any leave into the following year, although the contract may make some allowance for this.

pay holiday workers hours entitlements irregular zero
(Source: payadvice.uk)

By law, all workers are entitled to one week’s pay for each week of statutory leave that they take, where the amount of pay a worker receives will depend on the amount of hours they work and how they are paid for those hours. The principle is that pay received by a worker while they are on holiday should reflect what they would have earned if they had been at work.

For a zero hour worker, where their working pattern is not guaranteed or fixed, a week’s pay for the purposes of paid holiday entitlement will usually be based on the worker’s average pay from the required holiday pay reference period prior to the calculation date. Under the Good Work Plan, the government has legislated to increase the holiday pay reference period from 12 to 52 weeks.

This may mean that the actual reference period takes into account pay data from further back than 52 weeks from the date of their leave. It is only if no pay at all is received during a week should it be discounted as part of the holiday pay reference period.

On the facts of the case, the Trust sought to apply the 12.07% approach (as discussed above) on the basis that this also feeds into the calculation of holiday pay, simply calculating Ms Brazil’s earnings at the end of a term and paying her one-third (of 3 terms) of 12.07% of that figure. The result was that Ms Brazil was entitled to holiday pay at a rate of 17.5% of her earnings, rather than 12.07% received by full time staff, where no account was to be taken of the fact that she only worked for part of the year.

Find out more about general practices around calculating holiday entitlement for casual and zero hours workers with this overview guide from myhrtoolkit, with input from employment solicitor Toby Cochran of Fleets LLP. Please note that this guide focuses on calculating zero hour contract holiday entitlement, not holiday pay, and that you should seek specific legal advice to ensure all workers receive statutory holiday entitlement correctly.

hour zero holiday pay contracts employment contract
(Source: im-hired.com)

Firstly, government guidance on calculating holiday entitlement for workers with irregular hours is rather vague. “In practice, if needed, employers may wish to calculate average days or hours worked each week based on a representative reference period, although the Regulations do not expressly provide for this.

In all cases, employers must ensure that each worker receives at least 5.6 weeks’ annual leave per year.” As there is no fixed work pattern on which to base annual leave, the entitlement should instead generally be kept in weeks.

This depends on the circumstances, and employers must ensure workers are able to take their full leave entitlement. Using this method, a worker gets just over 7 minutes of holiday entitlement for every hour they work (more specifically, 7.242).

Please note that, if you offer contractual holiday on top of the statutory amount, you will need to adjust the percentage you are using to ensure it is accurate. When a worker’s holiday entitlement amount goes into decimal points, it can be difficult to know where to stop and where to round up.

A current case going to the supreme court suggests the 12.07% way may not always be the correct method to use for all workers. This was the crux of the issue in the legal case of Harper Trust v Brazil YWCA CIV 1402.

holiday pay zero hours calculating term discriminatory grounds directly either sexual belief religious gay brazel employees following case know need
(Source: www.ashtonshrconsulting.co.uk)

The Court of Appeal decision in this case could (and we stress could) have an impact on the arrangements for employers who engage employees in a non-set or no-fixed fashion. “In Brazil, the Court of Appeal confirmed that holiday entitlement should not be calculated on the basis of 12.07% of hours worked but instead should be based on an average of hours worked in the 12 weeks before leave is taken (this was before the increase to the 52-week reference period in April 2020).

“The Brazil case has not changed the law; it has merely highlighted a problem that already existed with the 12.07% method. If you have historically pro-rated holiday entitlement and applied this to remuneration of those who work non-fixed or variable (non-normal hours) then it would be a good time to review this method.

The system also predicts whether the worker will accrue the difference by the end of the holiday year. Camille is a Senior Marketing Executive for myhrtoolkit who writes on topics including HR technology, workplace culture, leave management, diversity, and mental health at work.

Holiday pay and entitlement are usually calculated based on the number of hours an employee works in a given period of time. In this post, we’ll explain how to calculate holiday pay and entitlement for zero -hours contract employees.

In fact, breaks in their working can even affect the sort of rights that accrue with time. Their specific pay and entitlement is calculated based on the number of hours they work.

(Source: payadvice.uk)

For full-time employees who work five days a week, the 5.6 weeks of annual statutory holiday entitlement equates to 28 days a year. But because they don’t work set hours, and because they may work a different number of days each week, it’s much easier to calculate their leave based on hours.

So zero -hours contract workers are entitled to a prorate amount of that 5.6 weeks holiday, which equates to 12.07% of the hours they work each year. So a zero -hours contract employee who works 10 hours in a week will accrue 72 minutes of paid leave.

You’ll have to do this calculation every week for every zero -hours contract worker on your books. To make things a little easier, we have a great holiday entitlement calculator you can use.

If you pay your zero -hours contract employees on a monthly basis, you can work out how much they’ve paid in a week by first calculating their average hourly pay for the last month. UK's law specifies that if a zero -hours contract employee hasn’t worked for four weeks, you may treat it as the end of their employment.

Even if you intend to offer the employee more work at a later date, you’ll still have to pay them for any taken leave. Calculating holiday pay entitlement for your zero hour contract workers can seem complicated.

contract zero rights hour know pay
(Source: www.pinterest.com)

Now that you’ve figured out the amount of time off you need to give your worker, you now need to work out the rate of holiday pay. To do this for zero hour contract workers, you can take an average of their pay over the previous 52 weeks.

Yet they remain a popular choice of contract for workers and employers alike. Therefore, it’s really important that if you have people in your company who are on zero hours contracts that you are fully up-to-speed on how holiday entitlement is applied to these employees, and how to calculate their holiday pay.

All zero -hours employees are entitled to statutory annual leave in the same way as workers on permanent or fixed-term contracts. Full-time workers in the UK are entitled to 5.6 weeks’ holiday, which is equivalent to 28 days.

You simply have to multiply the number of days they work each week by 5.6, which gives you their annual entitlement. The statutory minimum holiday entitlement is equivalent to 12.07% of the total number of hours worked in a year.

To make sure that employees on zero hours contracts get their statutory minimum holiday allowance, you can use the 12.07% rule. After you’ve worked out the zero hours employee’s holiday entitlement, you will then be able to calculate their holiday pay.

holiday pay employment template contract zero hours hour
(Source: vacationxstyle.org)

Therefore, based on our example, David is owed 1.93 hours of holiday entitlement and £15.11 of holiday pay. If this is something you regularly struggle with, or if your time is better spent doing other things, then give us a call to see how we can help.

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