March 29, 2021

The rules around zero-hours contracts can seem complex to those who are used to dealing with more traditional employment contracts.

We outline below the law on holiday entitlement, as well as addressing questions such as whether zero-hours workers get paid time off and how to calculate the holiday pay that they are entitled to.

Legal holiday entitlement

Under the Working Time Regulations 1998, all workers and employees are legally entitled to at least 5.6 weeks of paid holiday each year.

For most traditional full-time employees who work five days a week, this amounts to 28 days per year, but calculating the amount for workers on zero-hours contracts can be trickier as the hours they work are not known in advance.

Workers on a zero-hours contract have just as much right to paid holiday entitlement as their full-time equivalents.

Since they work fewer hours on average, they may be entitled to less time off, but they are guaranteed annual leave.

How much paid holiday leave are zero-hours workers entitled to?

Since zero-hours workers may not work a fixed amount of days a week, working out their entitlement in terms of hours can be easier than trying to work out how many days they are allowed to take.

If you have multiple zero-hours employees who work a different amount of hours from one another, you may have to figure out what they are entitled to individually.

The average worker is entitled to 5.6 weeks as a percentage of the total hours they work in a year.

This percentage works out as 12.07%, which many employers use to calculate the holiday entitlement of zero-hours workers.

Whether public or bank holidays have to be granted as paid holiday is a different matter.

This is not defined by the law but by the employment contract.

You do not have to offer paid time off for bank holidays, nor do you have to grant paid overtime, but many businesses choose to do so in order to ensure morale.

Working out holiday entitlement for zero-hours workers

Since your zero-hours workers are generally entitled to 12.07% of their total hours worked as holiday, you might be able to build their leave up over time-based on how much they work a week.

So, say that they work 10 hours a week – to work out how much leave they get from that week, you can divide the number of hours they work (10) by 100, then multiply it by the percentage they’re entitled to (12.07), and you see they have earned roughly 1.2 hours of paid time off.

However, calculating their holiday entitlement on the basis of 12.07% of the hours they work can cause problems.

This is because it is an unreliable method and may not match up with the statutory minimum holiday entitlement of 5.6 weeks.

Therefore, it is essential to check that the calculation does not result in the worker receiving less than the statutory minimum holiday entitlement, which tends to happen with seasonal zero-hours workers who only work during part of the year. 

To avoid this risk, we advise that instead, you calculate holiday based on the zero hours worker’s average weekly hours across a suitable reference period of 52 weeks.

The government provides a holiday entitlement calculator which is a useful tool for calculating holiday for workers with irregular hours, such as zero-hours workers.

Can zero-hours workers take holiday?

If the nature of their work is continuous rather than independent short-term assignments, zero hours workers should be permitted to request and take holiday in the same way as any other employee.

The normal holiday procedure within your business, including notice requirements and reasons for rejecting requests, should apply so that workers are not discouraged from taking holiday.

The situation is slightly different for casual workers who are not continuously employed but whose work for your business consists of a series of separate short assignments.

Often employers who engage casual workers on this basis do not want workers to take holiday during assignments as it would cause considerable disruption to the business and there is sufficient opportunity for the worker to have a break between assignments.

Therefore, you can pay these casual workers in lieu of the holiday they have accrued but not taken at the end of each assignment instead of permitting them to take holiday during the assignment.

It is important to note here that this is not the same as paying ‘rolled-up’ holiday pay which is now considered unlawful as it breaches the Working Time Directive.

Working out holiday pay for zero-hours workers

Generally, holiday pay is based on an employee’s standard weekly salary.

However, as zero-hours workers do not have set hours of work, they do not have a regular weekly salary.

Therefore, their holiday pay should be calculated using their average weekly pay in a 52-week reference period.

Previously, the reference period used was 12 weeks, but this was extended to 52 weeks in April 2020 to prevent irregular workers receiving lower holiday pay during quieter periods throughout the year.

The 52-week reference period for calculating the average weekly pay should solely consist of weeks in which the worker worked, with all non-working weeks discounted.

If a worker has not yet been at your business for a year, then the reference period should be shortened to their length of service.

If the worker has been at your business for over a year but they have not worked every week for the past 52 weeks, previous data can be used to create a 52-week reference period but it should not go back more than 104 weeks.

Holiday pay should not be calculated as 12.07% of the zero-hours worker’s annual salary as this breaches the Working Time Regulations 1998.

Given the irregular nature of a zero-hours worker’s work, calculating holiday pay in this way can often result in the worker receiving below the statutory minimum holiday pay, which amounts to an unlawful deduction from wages.

Summary

  • Zero-hours workers are entitled to the statutory minimum holiday entitlement of 5.6 weeks.
  • It is best practice to calculate a worker’s individual holiday entitlement by reference to their average weekly hours in the previous 52 weeks.
  • Depending on the contractual arrangement, zero-hours workers should be permitted to take holiday like any other employee or paid for untaken accrued holiday at the end of each of their assignments.
  • Holiday pay for a zero-hours worker should be calculated by reference to their average weekly pay in the previous 52 weeks.

If you have any queries or concerns regarding your zero-hours workers and their holiday entitlements, we can help you clarify them all.

Get in touch with our team of employment law and HR specialists, and you can make sure you’re compliant every step of the way.

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About the author 

James Rowland

James is the Commercial Director at Neathouse Partners and regularly writes articles surrounding issues in HR & Employment Law. Outside of the office, James is a keen Cricketer, playing in the Cheshire League for Nantwich CC. He also loves going to watch his football team, Crewe Alexandra. Feel free to connect with James on LinkedIn.

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