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Zero-hours contracts: holiday pay and entitlement

3 min read | 23 January, 2017 By Sarah Benstead

    

More than 780,000 people (that's about 1 in 40 workers) are on zero-hours contracts in the UK. 

Whether you run your own business, or are responsible for all things HR and employ people on zero-hours contracts, it’s important to understand and map out holiday pay and entitlement. 

Luckily, here at Breathe we've put together an easy guide to help you calculate holiday pay for any staff who are on zero-hours contracts.

Are staff on zero-hours contracts entitled to holiday leave and pay?

The simple answer is, yes.

Zero-hours contract workers have the same legal rights as employees on other contracts. The only exception is when there is a break in an employee's working pattern.

If this occurs, it could affect anything that accrues with time - such as the number of days of holiday entitlement.

Just like an employee on a permanent fixed contract, a zero hours worker is entitled to take paid leave and must also be paid any leave owing to them when their employment contract is terminated.

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How do you calculate zero-hours contract holiday entitlement?

Here's the numbers bit. But bear with us - it's not too tricky.

Most workers are entitled by law to 5.6 weeks of holiday per year.

That's 28 days for a 5-day-a-week worker. The same goes for employees who work 6 days a week, as it's capped at 28 days. 

It's completely up to you to decide if paid public holidays are counted as part of a worker’s leave entitlement, or whether you give these days in addition to the holiday entitlement.

Annual leave starts to accrue as soon as the employee starts working for you. You'll also have details of your “leave year” in place. For most companies, this runs from 1st January to 31st December.

As you're probably aware, for employees with fixed-time contracts leave is accrued monthly in advance, at the rate of one twelfth of their annual entitlement.

For employees on a zero-hours contracts, holiday entitlement accrues in the same way, but due to the sporadic nature of the work, it is easier to calculate it based on hours.

And here's how you do it.

The maths bit

So, your employee is entitled to a pro-rata amount of 5.6 weeks holiday, which is equivalent to 12.07% of hours worked over a year.

So, to find out what people on zero-hours contracts are entitled to, all you need to do is calculate 12.07% of the total number of days they've worked over a given period. 

The formula for this is:

(12.07 ÷ 100) x no. of days worked = holiday entitlement

Let's look at an example. 

An employee has worked 10 hours in a week.

To find out how much annual leave they've accrued from these hours, the calculation would be:

(12.07% ÷ 100) x 10 hours = 1.207 hours (we'd round this to 1.2 hours)

Et, voila.

 

So, how do I calculate holiday pay for my zero-hours staff?

Employees are entitled to receive zero-hours contract holiday pay. They are also eligible for payment in lieu of any untaken statutory leave entitlement on the termination of their employment.

To calculate the rate of holiday pay where you have workers without normal working hours, you can take an average of their pay over the preceding 12 weeks.

For any weeks where there were no hours worked, and therefore no pay received, then those weeks should be replaced by the most recent previous weeks where pay was earned.

And there you have it. You're now ready to tackle holiday entitlement for your zero-hours employees. An HR-superhero.

For more information on zero-hours contracts, check out our Zero-hours contracts guide.

 

How can HR software help?

HR software like Breathe takes the headache out of holiday-management.

The intuitive holiday-management feature can accommodate employees with a variety of working patterns - such as those with zero-hours contracts - meaning you can put the calculator away and focus on developing your people and growing your business.

To find out more, book onto one of our regular tours of Breathe, or start your free 14-day trial by clicking below.

 

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Posted on 23 January, 2017

By Sarah Benstead

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