Working out holiday entitlement for casual (zero-hours) employees can be extremely complicated. Our experts share everything you need to factor in.
Our HR & Employment Law Advice Line receives several queries each week regarding these matters. Common queries include:
- Are casual workers entitled to holidays?
- What’s the difference between a variable hour employee and casual worker?
- What is the correct calculation for paid annual leave for a part time worker?
- Are bank holidays automatically included in a year’s leave entitlement?
- When should the holiday year start for a new starter?
In this article, we answer all your questions about casual (or zero-hour) workers.
What is a zero-hours worker?
A zero-hours worker used to be the term for an employee working differing hours per week. However, in 2020, the Government issued new a definition for zero-hours workers. Their new definition is that of a casual worker.
A casual or zero-hour worker means that:
- There is no mutuality of obligation between the employer and casual worker
- The person only works on an ad hoc basis, and is not permanently on the payroll
- You as an employer do not need to give them work
- Likewise, the worker can either accept or refuse any offered work
Usually, a zero-hour or casual worker would only be working with the employer for a very short period of time. For example, they might be a bartender hired by a restaurant for three months for a busy period, a worker picking up a few shifts at a takeaway whilst the delivery driver is ill, or they might an interpreter hired for an initially unknown amount of time for a project. Each short-term assignment would effectively be considered a separate piece of ’employment’.
Zero-hours or variable-hours?
What was formerly known as a zero-hour contract before 2020 is now referred to as a variable-hours contract. Variable hour workers differ in that they are usually permanent employees with different working hours every week, and therefore there is mutuality of obligation between the employer and employee.
It’s important you don’t get these two types of workers mixed up, as they calculate holiday entitlement and pay differently. Please read this article to learn more about variable workers.
Are casual workers entitled to paid annual leave?
Yes, casual workers are entitled to annual leave, the same as standard employees.
Workers engaged on casual contracts have the same legal protections as more traditional ‘full-time’ or ‘part-time’ employees. We are sometimes asked, “Are casual employees entitled to paid annual leave?”. The answer is simply “yes”.
Casual workers accrue holiday entitlement in the same manner as full-time employees. The misunderstanding comes when a casual worker may work for two weeks in January, but then has no further work until April. In this case, they are still entitled to full holiday accrual, but it will be based on their completed work during their period of employment.
So, whilst the principle is simple, sometimes the calculation for what the entitlement is can be quite complex.
Calculating holiday entitlement on leave years that start before April 1st 2024
The government put in place this alternative method to calculate leave entitlement, in order to address the Brazel v Harpur Trust ruling. This should be used for current annual leave years, for any annual leave years that reset after 1 April 2024, you can use the 12.07% method detailed below.
What information do I need to calculate holiday entitlement for casual workers currently?
To calculate a casual or zero-hour worker’s holiday entitlement, you’ll need these three things:
- Their employment start date
- Their employment end date
- Their annual holiday entitlement, if they were to work full time
Use the worker’s employment start and end date to find out how many days in the year they’ve worked. Please note this is the length of time the contract lasted, not the number of days or weeks they actually worked. If the worker hasn’t worked a full holiday year – whatever the dates are for your business – you have to use their employment start date as the start of the leave year.
Note their annual holiday entitlement is the equivalent to how many days they would take off work as holiday if they worked full-time, inclusive of any bank holidays.
How to calculate annual leave before 1st April 2024
For this method (on annual leave years starting before 1st April 2024) the calculation for a zero-hour worker’s holiday entitlement as described on the government website is*:
Full-time annual leave entitlement in days / (No. of days in employment / number of days in a year) = weeks of holiday entitlement.
Please note, the number of days in a year used in the calculation could be 365 or 366, depending if it falls on a leap year or not.
It is the employer’s responsibility to convert this to days or hours if needed. Unfortunately, there is no legislation on how to do this, so each HR expert needs to use the method they think is the fairest at their own discretion when making this calculation. Please note, this may involve pro-rating the holiday entitlement if your worker has only worked less than five days a week during their employment with you.
*Please seek specialist advice for further information if you’re unsure.
Calculating holiday entitlement from April 1st 2024
After the Supreme Court judgement in Brazel v Harpur Trust – which ruled employers could not pro rate a part-year worker’s holiday entitlement, although they could still pro rate a part-time worker – the “12.07% method” has returned to the open arms of HR professionals everywhere.
The 12.07% method is the opportunity to utilise an accrual system based on a percentage of pay for part-year (term time) and zero-hour workers.
At a statutory minimum of 5.6 weeks of annual leave a year, this means 12.07% of the person’s hours worked are given back to them in paid annual leave. If your company offers contractual or enhanced annual leave however, the percentage will change to reflect this.
Be aware, this will only apply to holiday years on or after 1st April. And if you changed contractual provisions for your term-time workers to reflect the Brazel judgement, you’ll need to consult to restore your previous provision.
How to calculate using the 12.07% accrual method
The calculation is:
Number of holiday days for full time employee / 5 days a week = weeks of holiday entitlement.
E.g. 28 / 5 = 5.6 weeks
No. of weeks holiday / working weeks in a year (which is 52 weeks a year – no. of weeks holiday) = % of holiday entitlement
E.g. 5.6 / (52 – 5.6) = 12.07%
You then apply this to the hours they’ve worked:
Hours zero-hour person has worked in this pay period x % holiday = hours they’ve accrued as holiday
E.g. 68 hours x 12.07% = 8.21 hours
Why is it often more practical to calculate a casual contract worker’s annual leave by hours worked?
All employees (and workers) are entitled to a statutory minimum of 5.6 weeks paid annual leave per year, inclusive of bank holidays. For a traditional Monday-to-Friday full timer, this equates to 28 days. However, the employer can agree to give a higher entitlement contractually. For example, they might give five weeks per year in addition to paid bank holidays, making a total of 6.6 weeks (or 33 days) per year.
Employees on casual contracts accrue annual leave from the first day of their employment, just like a normal full-time employee. However, because of the nature of their employment, they may work different hours each day / week / month throughout their employment. Therefore though the entitlement technically accrues in the same way, it is often more practical with casual employees to calculate their entitlement based on hours worked.
How do I calculate the holiday payment for a casual worker?
Due to the ad hoc nature of casual work, it is very unlikely that a casual worker will take any holiday during their casual assignment as they are usually quite short-term. This means that normally their holiday pay will be paid at the end of their assignment.
Next steps
You can read up on how to calculate holiday entitlement for part-time workers and how to calculate holiday pay for employees on a range of contracts.
We hope this helps you to understand this tricky and sometimes misunderstood issue. Moorepay customers who would like specific advice on casual contracts should contact the Advice Line on 0345 073 0240.
Disclaimer
Please note, this calculator is based on current guidance from gov.uk, as of June 2023, as a guide to employers. It is provided as a general example only and is not substitute for legal advise on any specific circumstances. Employers should seek their own legal advice. Moorepay are not responsible for usage, and employers use at their own risk.
