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Holiday Pay and Zero Hours Contracts

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Looking to calculate holiday pay for a zero-hours employee who started mid-May - they've been on the payroll for 22 weeks, but only worked 10 of them - 210 hours in total @ £10/hour. Using the 12.07% method, they'd be due £253.47

Using the new method, I understand their average weekly pay should exclude the weeks they didn't work, giving an average weekly pay of £210. However, do they still accrue holidays over the full 22 weeks? If so, that gives 22/52 x 5.6 = 2.37 weeks' entitlement, or £497.70. A massive difference!

Please somebody, tell me I'm being daft and have missed something obvious!

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By memyself-eye
18th Oct 2021 18:09

how can they accrue HP for time they have not actually worked?

£253.47 is correct

Trust me I (was) an accountant

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By legerman
18th Oct 2021 18:35

memyself-eye wrote:

how can they accrue HP for time they have not actually worked?

£253.47 is correct

Trust me I (was) an accountant

Because the Government legislated to change it in April 2020. Holiday pay is now based on time in employment, not hours worked.

https://assets.publishing.service.gov.uk/government/uploads/system/uploa...

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By legerman
18th Oct 2021 18:31

Your second calculation is indeed correct unfortunately. A law I think is totally stupid but holiday pay is now based on time in employment, not time worked. Whether he'd worked 1 week of the 22 or all 22, if the average pay was £210 he is due £497.70

The old 12.07% calculation tuned in perfectly with the 5.6 weeks available to full time employees.

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By legerman
18th Oct 2021 18:35

deleted

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RLI
By lionofludesch
18th Oct 2021 18:49

The solution is to get them to work every week.

Rather than have whole weeks off.

Or - keep giving them forms P45.

Either way, the Government have turned it into a real mess. It just doesn't suit the way folk are employed these days.

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By Paul Crowley
18th Oct 2021 20:01

The bad news version is my understanding as well
12.07% was fair, but no longer the rule.
I stopped doing the wages for a care home type company because they refused to do holiday pay the new way. The director, manager, and property agent all insisted on the 12% rule based on their employment law advisor's opinion. The job was never economic because of the historic daft arrangements and inability to ever give us good data in a timely fashion; my wages staff all very pleased when I advised them that we were no longer acting

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By the_drookit_dug
18th Oct 2021 21:52

Thanks folks.

It's been a while since I've had to do a holiday pay calculation myself - I was aware of the changes, but hadn't given it detailed thought until now.

I remember with some satisfaction back in 2011 introducing the 12.07% method to a business with many seasonal employees who were paid their holiday pay at the end of the season, and the 12 week average caused no end of disputes. My solution pleased everybody - those were the days!

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By Cylhia66
19th Oct 2021 07:31

With this new method, is it possible to pay the employees their holiday pay allowance on a monthly basis?

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By lionofludesch
19th Oct 2021 09:05

Cylhia66 wrote:

With this new method, is it possible to pay the employees their holiday pay allowance on a monthly basis?

It is if the employee agrees to take it as holiday

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By legerman
19th Oct 2021 11:52

Cylhia66 wrote:

With this new method, is it possible to pay the employees their holiday pay allowance on a monthly basis?

It wouldn't make a difference to the calculation. As Lion said, the employee would have to take holiday.

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By john hextall
21st Oct 2021 11:45

Unfortunately, and ridiculous as it seems, holidays don't count towards worked hours. The system as defined in unworkable because of the compromises allowed in the first year or so of working. I think the only fair way round it is to use the 12.07% uplift until enough paid weeks have built up to calculate the average pay correctly. Then keep your fingers crossed the employee does not take you to court in that period.

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By NYB
19th Oct 2021 11:04

I feel sick to the stomach with all this. I have two little music schools who place people in school for lessons. It's random hours. I have got to grips with the 52 week scenario which has been impossible to put in place as they were in and out of Furlough not all on the same weeks. I just started again from April to get "true" weeks. And I pay it monthly. And now apparently that is wrong.
And I do a ZERO hours contract with TUI. And do you know - my HP shows monthly at 12.07%

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