Calculating holiday for your zero hours employees

It was confirmed last week by the Supreme Court in the case of Brazel vs Harpur Trust, that using 12.07% of hours worked to calculate holiday for zero hours contracts has ended.

Employers now need to adopt another approach to calculate annual leave entitlement of 5.6 weeks for every worker/employee regardless of how many weeks of the year they work.

So how will this work in practice?

The easiest way to calculate holiday pay is by means of a worked example, so here’s one.

Fred works on a zero hours contract as a cleaner. His employer’s holiday year is 1st January to 31st December. He works variably each week, some weeks he has no work, some weeks he will have up to 20 hours.

The first thing the employer needs to do is to establish in Fred’s contract of employment how the holiday will be given. The employer may fix the annual leave, or allow Fred to book it. We would recommend that Fred’s employer specifies how the leave is taken, you will see why in a minute!

So let’s say Fred’s employer decides to fix the leave and requires Fred to take his leave as follows:

1. 1 week in April
2. 2 weeks in July
3. 1 week in September
4. 1.6 weeks in December

When Fred’s employer wants to work out a weeks leave in April, Fred’s employer has to go back and find the previous 52 weeks of work.

As we’ve already said, Fred doesn’t work every week, so this isn’t going to be as straightforward as looking at the previous 52 weeks. The employer may have to go back up to 104 weeks to find 52 weeks where Fred earned wages. Any weeks where Fred has had any SSP need to be skipped, any week where he didn’t work, needs to be skipped.

Once 52 weeks are found, the employer adds them up and divides by 52 to find the average week’s pay. That figure is then given to Fred as holiday pay when he takes annual leave.

If Fred hadn’t worked 52 weeks, the employer goes back as many weeks as he has worked. So if he has had 20 weeks of paid work before his holiday, the employer finds the average for the 20 weeks.

As you will see from this worked example there is nothing easy about this, hopefully it will get easier with time and practice. We feel this change will add to the cost of calculating annual leave which can’t be good for UK business. If we can be of any assistance, please call us on 01527 909436.