The employment landscape in the UK has seen an increase in the use of variable-hour contracts, formerly known as zero-hours contracts, and the employment of workers on a casual basis. For employers, it is crucial to understand the obligations regarding holiday allowance and pay for these workers to ensure legal compliance and maintain positive workplace relations. This guide and calculator aims to clarify holiday allowance entitlement for casual workers on zero-hours contracts.
See also: our part-time worker holiday calculator.
What are variable-hours or zero-hours contracts?
To understand holiday allowances, we first need to clarify what variable-hours contracts entail. These contracts do not guarantee regular work hours for the employee, instead providing flexibility in the working hours based on the employer’s needs. Workers under these contracts, often referred to as casual workers since 2020, agree to be available for work as and when required, without the expectation of fixed hours.
Holiday entitlement for casual workers on variable-hour contracts
Despite the inherently flexible nature of their work, casual workers on variable-hour contracts are entitled to statutory holiday pay, similar to full-time employees. This right is protected under the Working Time Regulations 1998, which ensure that most workers, irrespective of their contract type, receive 5.6 weeks of paid holiday each year.
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Calculating holiday pay for zero-hours or variable-hours workers
Given the irregular working hours of casual workers on variable-hour contracts, calculating holiday pay might seem challenging. However, holiday entitlement accrues in proportion to the hours worked, according to the following formula:
Number of days in employment x 12.07%
Where does the 12.07% come from?
This is because a full-time employee is entitled to 5.6 weeks of annual leave per year.
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The calculation is:
Number of holiday days for full time employee ÷ 5 days a week = weeks of holiday entitlement.
For example, 28 ÷ 5 = 5.6 weeks
Number of weeks holiday ÷ working weeks in a year (which is 52 weeks a year, minus number of weeks holiday) = percentage of holiday entitlement
For example, 5.6 / (52 – 5.6) = 12.07%
You then apply this to the hours they’ve worked:
Days zero-hour worker has worked in this pay period x % holiday = days they’ve accrued as holiday
This calculation ensures that holiday pay is fairly distributed based on the actual work done.
Payment of holiday pay
Employers adopt various methods to manage holiday pay for casual workers on variable-hour contracts. One approach is including holiday pay within the hourly rate, known as “rolled-up” holiday pay. While this method has been scrutinised in the past, it remains permissible as long as the allocation for holiday pay is clearly indicated on the payslip.
Best practices for employers
- Clear communication: Clearly outline holiday pay terms in the employment contract or agreement.
- Accurate record-keeping: Keep detailed records of hours worked by casual workers to ensure correct holiday pay calculation.
- Consistency and fairness: Apply uniform principles for holiday pay across all workers to maintain fairness and avoid disputes.
Legal considerations
Staying informed about current legislation and case law regarding holiday pay and employment rights is vital for employers. Resources and guidance from the UK government and the Advisory, Conciliation and Arbitration Service (ACAS) are invaluable for navigating these complex issues.
Conclusion – Zero hours holiday entitlement calculator for casual workers
Correctly understanding and implementing holiday allowance for casual workers on variable-hour contracts is not only a legal requirement but also crucial for fostering positive employment relationships. Ensuring transparent and fair calculation of holiday pay can lead to a more motivated and dedicated workforce, benefiting the business’s overall success. As the nature of employment continues to evolve, keeping up to date with legal obligations regarding holiday entitlement is essential for UK employers.