There are more than 900,000 people – or 2.9% of the UK workforce – who are on zero hours contracts. If you employ people on zero hours contracts and you run your own business, or if you are the person responsible for aspects of HR in your company, then it’s important that you understand how annual leave and pay is calculated for these workers.
Are staff on zero hours contracts entitled to holiday leave and pay?
Zero hours contract workers have the same legal rights as employees on other contracts, except where there are breaks in their working. Here, those breaks may affect any rights that accrue with time, such as the number of days of holiday entitlement. They are entitled to take paid leave and must also be paid any leave owing to them when their employment contract is terminated.
How do you calculate zero hours contract holiday entitlement?
Most workers are entitled by law to 5.6 weeks of holiday per year. This equates to 28 days for a 5-day-a-week worker. It’s also the same for employees who work 6 days a week, as it is capped at 28 days.
It is up to you, the employer, 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 entitlement.
Annual leave starts to accrue as soon as your worker begins working. You will also have in place details of your “leave year”. For many companies their leave year will run from 1st January to 31st December. But other companies choose to follow the tax year, or use their own dates.
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.
So, your worker is entitled to a pro-rata amount of 5.6 weeks holiday, which is equivalent to 12.07% of hours worked over a year. The 12.07% figure is calculated by taking 5.6 weeks’ holiday and dividing it by 46.4 weeks (which is 52 weeks less 5.6 weeks). So, holiday is accrued at a rate of 12.07% per hour.
To give an example, if an employee has worked 20 hours in a week, then they would become eligible to take 144 minutes of paid leave.
With the figures rounded down, the calculation is:
(12.07/100) x 20 hours = 2.4 hours = 144 minutes.
How do you calculate zero hours contract holiday pay?
Workers are entitled to receive zero hour 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.