Holiday pay for zero-hour workers and part year workers

Summer is fast approaching which means holiday season will shortly be arriving. 

 With this in mind, it is important for employers to ensure that they are paying holiday pay accurately to irregular, zero-hours and part year workers. 

All employees are entitled to the statutory minimum holiday leave of 5.6 weeks per year, however the amount of pay they receive for their holiday depends on the number of hours they work and how they are paid for them. 

There are two methods that an employer can use to calculate holiday pay for their zero hours & part year workers – the standard 52-week method or using rolled up holiday pay. 

Standard 52 week holiday pay calculation 

The standard method of calculating holiday pay for irregular hours workers is based on a reference period of the previous 52 weeks of pay that an employee has received prior to taking their leave. 

 For example, a weekly paid employee is to take the entire upcoming week off on annual leave. 

They have worked each week for the previous 52 weeks, for an average of £200 pay per week.

Therefore, they will be paid £200 holiday pay for their week of holiday leave.

It is important to ensure that the 52-week reference period that is being used in this calculation includes 52 weeks in which the employee has performed work. Where an employee did not work in a week, this week should not be included in the reference period and one additional week previous should be used so that the reference period always includes 52 weeks.  

 An employer should go back no further than 104 weeks to obtain the 52 weeks needed for the reference period. If they reach this limit and do not have 52 weeks, then the reference period becomes the number of weeks the employee worked over the 104 weeks. 

For example, if an employee worked only 28 weeks of the previous 104, their calculation would be as follows:  

Total pay in 28-week reference period = £7,891.00 

Average weekly pay: £7,891.00 / 28 weeks = £281.82  

Rolled up holiday pay  

Rolled-up Holiday pay was re-introduced for holiday years starting on or after 01 April 2024.  It can be only be used for casual workers (zero-hour workers) and part year workers and was brought back in an effort to simply holiday pay calculations and increase transparency for employees.  

 What is rolled up holiday pay? 

This is where the worker is paid an additional sum of 12.07% of their pay in each pay period in lieu of being paid when taking their holidays. 

 How does this look in practice?  

Jenny’s employer has decided to use rolled up holiday pay from the start of the new holiday year, January 1^st, 2025. 

Jennys has worked 100 hours in January for a total payment of £1250 

 Jenny’s payslip for January will show: 

Total hourly pay = £1,250 

12.07% Rolled up holiday pay = £150.88 

Total pay for the period = £1,400.88 

 As Jenny is being paid 12.07% holiday pay each pay period, it means that she will not accumulate holiday pay, and she will not be paid for any annual leave. 

Employees on statutory leave 

 An irregular paid worker or part year worker must not lose any holiday pay entitlement when off sick or on other statutory leaves such as: 

Maternity leave

Paternity leave

Adoption leave

 As such, the employer must continue to pay the employee rolled up holiday pay whilst the employee is on any such leave. The pay should be calculated the basis of the employees average weekly holiday across the relevant period, which is the 52 weeks prior to the statutory leave beginning.  

For example 

Lucy is paid weekly and has informed their employer that they have been signed off work sick for the next two months.  

Their average weekly holiday pay across the 52 weeks before the sick leave started was £36. This means, Lucy’s employer must pay them £36 holiday pay each week they are off sick.  

 Where the employer has not been using rolled up holiday pay for the last 52 weeks, the relevant period becomes the number of weeks in which rolled up holiday pay has been used. 

Where an employee has not been employed with their employer for 52 weeks, the relevant period becomes the number of weeks the employee has been employed. 

In addition to being paid whilst on statutory leave, an employee must also not lose any entitlement to leave whilst they are absent.  

Things to consider if you are thinking about using rolled up holiday pay 

It is important as an employer to consider the below before implementing rolled up holiday pay in your business:  

Talk to workers about the change

Listen to, and take into consideration, any queries and questions the workers  may have

Talk to Trade Union Reps if required

Check if contracts need to be changed

What to remember as an employer 

 Whichever method you chose to pay your irregular hours and part year workers their holiday pay, it important to remain consistent in that method. 

The method of calculation should not be changed during the holiday year, nor should the method be changed between employees. 

 Furthermore, it is important, especially when using rolled up holiday pay, that employees are encouraged to take their leave. 

As previously noted, all employees are entitled to the statutory minimum holiday leave of 5.6 weeks per year. 

Employers have a legal obligation to their employees to ensure that their workers can take the holiday they are entitled to, even where they have been paid rolled up holiday pay. 