Zero hours contracts – also known as casual contracts – have been the subject of much debate in recent years. Yet they remain a popular choice of contract for workers and employers alike.
According to the most recent figures, there are 901,000 people in the UK on so-called zero hours contracts, which represents 2.8% of the working population.
Therefore, it’s really important that if you have people in your company who are on zero hours contracts that you are fully up-to-speed on how holiday entitlement is applied to these employees, and how to calculate their holiday pay.
What is a zero hours contract?
A zero hours contract is where an employer is not obliged to give any working hours, and a worker is not obliged to accept any hours. They’re incredibly flexible arrangements that can benefit both a business and a worker.
They’re very different to permanent or fixed-term contracts, where an employer and employee agree a set number of hours that the employee must work.
Employees on zero hours contracts often work irregular hours, which can make calculating holiday pay and entitlement a bit different from those on permanent or fixed term contracts with defined hours.
Do zero hours contract workers get holiday entitlement?
Yes. All zero-hours employees are entitled to statutory annual leave in the same way as workers on permanent or fixed-term contracts.
How do you calculate zero hours contract holiday entitlement?
Full-time workers in the UK are entitled to 5.6 weeks’ holiday, which is equivalent to 28 days. This is simple to work out if employees work regular shifts. You simply have to multiply the number of days they work each week by 5.6, which gives you their annual entitlement.
But this becomes difficult to calculate for zero hours employees, as they often work sporadic hours.
The simplest way to work out entitlement for zero hours employees is to calculate their holiday entitlement based on the amount of hours they’ve worked. This is called an ‘accrued entitlement’.
The statutory minimum holiday entitlement is equivalent to 12.07% of the total number of hours worked in a year.
To make sure that employees on zero hours contracts get their statutory minimum holiday allowance, you can use the 12.07% rule. You can do this by multiplying the number of hours they’ve worked by 12.07%.
David is on a zero hours contract and worked 16 hours in a week. You’d work out how much holiday entitlement he accrued by doing the following calculation:
(12.07 ÷ 100) x 16 = 1.93 hours
As 1.93 hours is equal to 115.8 minutes, your company would owe Bob around 1 hour and 55 minutes of holiday entitlement.
If you’d rather not calculate this manually, there are a couple of options available to you.
You can use the holiday entitlement calculator on the government’s website, or you can automatically calculate it based on the parameters set in an HR software platform that supports this functionality.
How do you calculate zero hours holiday pay entitlement?
After you’ve worked out the zero hours employee’s holiday entitlement, you will then be able to calculate their holiday pay.
To do this, multiply their hourly rate by their holiday entitlement.
For example, David has 1 hour and 55 minutes of holiday entitlement.
To calculate David’s holiday pay, you would do the following:
£7.83 x 1.93 = £15.11
Therefore, based on our example, David is owed 1.93 hours of holiday entitlement and £15.11 of holiday pay.
If you work at a company with lots of employees on zero hours contracts, manually calculating all of their pay and entitlement will take up a lot of time. If this is something you regularly struggle with, or if your time is better spent doing other things, then give us a call to see how we can help. Or if you’d rather get in touch a different way, you can start a live chat with one of our team.