Holiday pay for zero hours contracts

By law, your employees get 5.6 weeks’ paid holiday every year as long as they work five days a week.

But staff on zero hours contracts won’t work the same amount of hours each week—in fact, some weeks they won’t work at all.

Yet all zero hours workers—unless they’re self-employed—still get holiday pay. Find out how to work out holiday pay for casual workers.

How to calculate annual leave for zero-hours contract?

All employees are entitled to 5.6 weeks paid annual leave. This includes workers on zero-hours or variable-hours contracts. As such, there should be no need to do any further calculations to work out accrual or entitlement (unless for part-time or fixed-term staff).

Previously, you could work out annual leave for workers with irregular hours using the 12.07% Method, but the UK Supreme Court has confirmed this should not be used for any holiday calculations.

Instead, you should make sure all staff get 5.6 weeks’ leave per year. In practice, this means an employee who works for 30 weeks of the year gets the same annual leave entitlement as someone who works 52 weeks per year.

Holiday should be taken in blocks of one week to ensure pay calculations are correct and based on average weekly pay.

How do you calculate zero-hours contract holiday pay?

Holiday pay should be paid at the normal rate of pay. Where weekly pay varies, you should calculate holiday pay based on an employee's average weekly earnings over the previous 52 paid weeks.

When you calculate the amount of money you paid your worker, do not include the weeks they didn't work. It should also not include any weeks where “normal” pay wasn’t given, for example, if they were on sick leave so given sick pay.

You can go back a maximum of two years (104 weeks) to obtain the relevant 52 weeks' pay data. If you don't have 52 weeks' data, then the reference period becomes the number of weeks’ worth of data available.

What happens if I don’t give zero hours contract workers holiday pay?

Workers do get holiday pay on zero hours contracts, and it’s your responsibility to make sure you pay them what you owe.

If you don’t give eligible staff holiday pay or falsely claim they’re self-employed so you don’t have to pay them, your staff could take you to an employment tribunal.

You could then end up paying out thousands if the tribunal rules in your employee’s favour. And the penalty will probably be much more than the holiday pay you owed them.

Review how you give workers on zero hours contracts holiday pay to make sure you’re not short-changing them—for both their benefit and yours.