Zero hour contract holiday pay

09 July 2019

Staff on zero hour contracts don’t have all the same rights as other employees, but they do get holiday pay.

However, because staff on zero hours contracts won’t work the same hours each week, it can be hard to work out their holiday entitlement. And you could face employment tribunals if you get it wrong.

In this article, we’ll explain the rules around zero hour contract holiday entitlements, and how to work out their holiday pay.

Do staff get holiday pay on zero hour contracts?

Yes, every employee and worker is entitled to minimum holidays UK wide.

The holiday entitlement for zero hour contract staff is the same as a worker with guaranteed hours (5.6 weeks).

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How to calculate holiday entitlement on zero hours contract

It can be a little complied to calculate holiday entitlement for zero hours staff.

There are a number of options for zero hour contract holiday pay and entitlement calculations, as long as you follow the zero hours contract holiday pay rules.

They are:

  • Calculate an average weeks’ pay.
  • Provide 12.07% of hours worked.
  • Rolled up holiday pay.

Calculating an average week’s pay

For zero hour contract holiday pay, the employer must calculate an average weeks’ pay, by going back over the last 52 weeks in which work has been performed (skipping those weeks where no work was completed, to a maximum of 104 weeks, if they have not worked for that long, a shorter period is fine to use).

This average will then be the basis for any holiday pay for zero hours contract staff.

For holiday accrual for zero hour contracts, it will also be necessary to establish their average working week. It is up to the employer which method they use for this. Using the same as for holiday pay is likely to be the simplest way.

The average week is then multiplied by 5.6 to establish the holiday entitlement. This is then done each time holiday is requested, as the average changes.

Providing 12.07% of hours worked

Another way of calculating holiday entitlement for zero hours contract is to take 12.07% of the hours worked in 52 weeks.

Using this method of calculating holiday for zero hours contract is the most straightforward method to use, but can be problematic as it does not account for long periods of not working when the individual is still under their contract.

Rolled up holiday pay

Another option is rolled up holiday pay zero hours contract.

In this method, 12.07% of the regular pay is paid on top as holiday. So every time they get paid, they also get holiday pay.

When they then go away, nothing is paid. However, this has been rejected by the courts, and it is not recommended.

Unless the employer carefully manages it, there’s no guarantee that enough time is taken off, and there could be an argument to say that as no holiday was taken at the time, it could not have been holiday pay, so more pay is requested when they go on holiday.

Many zero hours staff are casual workers, which means they only work for short amounts of time. A better option therefore is for employers to pay them for the holiday that has been accrued during the individual assignment they have worked on, at the end of it within their final pay.

Expert support on zero hours contracts with Peninsula

It can be difficult to work out the correct holiday pay for zero hour workers, but failing to do so can cause problems if staff take it to court.

Peninsula’s expert HR consultants can help you to calculate holiday entitlements for all of your staff, and protect your business from potential legal issues.

For further help with contracts, call us on 0800 051 3682.

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