Zero Hours Contract Holiday Pay
By Zero hours contracts have become increasingly popular in recent years, offering both employers and employees flexibility in the workplace. While these contracts may have their benefits, they can also be a source of confusion, particularly when it comes to understanding holiday pay entitlements. This comprehensive guide will help you navigate the complex world of zero hours contracts and holiday pay, ensuring you’re well informed on your rights and obligations.
What is a Zero Hours Contract?
A zero hours contract is an employment agreement between an employer and employee that does not guarantee a minimum number of working hours for the employee. Instead, the employee is only required to work when called upon by the employer, and the employer is not obligated to provide work for the employee. This type of contract is most commonly used in industries that experience fluctuating demand, such as hospitality, retail, and healthcare.
Zero Hours Contract Holiday Pay: The Legal Framework
In the UK, workers on zero hours contracts are legally entitled to holiday pay, as outlined in the Working Time Regulations 1998. These regulations stipulate that all workers, regardless of their employment status, are entitled to 5.6 weeks of paid leave per year. This entitlement is calculated based on the worker’s average weekly hours and pay over a 12-week reference period.
Calculating Holiday Pay for Zero Hours Contract Workers
To calculate holiday pay for a zero hours contract worker, you’ll need to consider their average weekly hours and pay over a 12-week reference period. The following steps outline this process:
Step 1: Determine the worker’s average weekly hours
Add up the total hours worked over the 12-week reference period
Divide this figure by 12 to calculate the average weekly hours
Step 2: Determine the worker’s average weekly pay
Add up the total pay received over the 12-week reference period
Divide this figure by 12 to calculate the average weekly pay
Step 3: Calculate the worker’s holiday pay
Multiply the worker’s average weekly hours by the worker’s average weekly pay
Multiply this figure by 5.6 to determine the worker’s total annual holiday pay entitlement
Rolling Up Holiday Pay
In some instances, employers may choose to “roll up” holiday pay for zero hours contract workers. This means that instead of paying the worker for their holiday leave when they take it, the employer pays an additional amount on top of their regular pay to account for their holiday pay entitlement. This practice is legal in the UK, provided the following conditions are met:
The rolled-up holiday pay is clearly identified as such on the worker’s payslip
The rolled-up holiday pay is paid at the same time as the worker’s regular pay
The worker still receives their full holiday pay entitlement over the course of the year
Carryover of Unused Holiday Entitlement
Under UK law, zero hours contract workers are allowed to carry over up to 8 days of unused holiday entitlement from one leave year to the next. This carryover must be used within 18 months of the end of the leave year in which it was accrued.
Termination of Employment and Holiday Pay
If a zero hours contract worker’s employment is terminated, they are entitled to receive payment for any accrued but untaken holiday leave. This payment is calculated based on the worker’s average weekly hours and pay over the 12-week reference period leading up to the termination of their employment.
Frequently Asked Questions
Are zero hours contract workers entitled to holiday pay?
Yes, zero hours contract workers in the UK are legally entitled to holiday pay under the Working Time Regulations 1998.
How is holiday pay calculated for zero hours contract workers?
Holiday pay for zero hours contract workers is calculated based on their average weekly hours and pay over a 12-week reference period.
Can zero hours contract workers carry over unused holiday entitlement?
Yes, zero hours contract workers can carry over up to 8 days of unused holiday entitlement from one leave year to the next, which must be used within 18 months of the end of the leave year in which it was accrued.
Is rolling up holiday pay legal for zero hours contract workers?
Yes, rolling up holiday pay is legal for zero hours contract workers in the UK, provided certain conditions are met, such as clearly identifying the rolled-up holiday pay on the worker’s payslip and ensuring the worker receives their full holiday pay entitlement over the course of the year.
What happens to accrued holiday pay when a zero hours contract worker’s employment is terminated?
If a zero hours contract worker’s employment is terminated, they are entitled to receive payment for any accrued but untaken holiday leave. This payment is calculated based on their average weekly hours and pay over the 12-week reference period leading up to the termination of their employment.
Are zero hours contract workers entitled to the same holiday pay as full-time workers?
Zero hours contract workers are entitled to a pro-rata holiday pay based on the hours they have worked, while full-time workers are entitled to a fixed holiday pay based on their contracted hours. Both are entitled to 5.6 weeks of paid leave per year as per the Working Time Regulations 1998.
Can an employer refuse a zero hours contract worker’s holiday request?
An employer has the right to refuse a holiday request if they have a valid business reason. However, they must still allow the worker to take their full holiday entitlement over the course of the year.
What is the 12-week reference period?
The 12-week reference period is used to calculate the average weekly hours and pay for zero hours contract workers for the purpose of determining their holiday pay entitlement. It consists of the 12 weeks immediately preceding the calculation date.
Can zero hours contract workers be paid in lieu of taking holiday leave?
No, zero hours contract workers cannot be paid in lieu of taking holiday leave, except in the case of termination of employment when they are entitled to payment for any accrued but untaken holiday leave.
How does holiday pay for zero hours contract workers differ from that of part-time workers?
While both zero hours contract workers and part-time workers are entitled to pro-rata holiday pay based on the hours they have worked, the method of calculation may differ due to the varying nature of zero hours contracts. The 12-week reference period is used to calculate holiday pay for zero hours contract workers, while part-time workers’ holiday pay is usually based on their contracted hours.
