Understanding zero hours contract holiday pay
If you do not have fixed working hours, figuring out your statutory leave used to be incredibly confusing. Because your shifts change from week to week, applying the traditional "28 days a year" rule doesn't work. To fix this, zero hours contract holiday pay is now calculated differently.
The 12.07% rule for holiday pay for zero hour contracts
For leave years starting on or after 1 April 2024, the UK government introduced a clear legal standard: your holiday accrues directly based on the hours you work. The multiplier used is 12.07%. This means that holiday pay for zero hour contracts and irregular hour workers accrues at a rate of just over 7 minutes for every hour worked.
How to do a holiday calculation part time correctly
It's important to understand who this rule applies to. If you need to do a holiday calculation part time for someone who works exactly 3 days a week, every week, you should not use this calculator. That is regular part-time work, which uses the standard 5.6 weeks statutory rule.
However, if your hours fluctuate (irregular hours) or you only work certain months of the year (part-year worker), you simply multiply your total hours worked in a pay period by 12.07% to find out how many hours of paid leave you have earned.
Demystifying holiday pay for zero hours workers
One of the biggest changes for holiday pay for zero hours workers is the legal re-introduction of "Rolled-up holiday pay".
Instead of keeping track of accrued hours and paying you when you actually take a day off, your employer can now choose to pay your holiday pay as an additional 12.07% supplement on top of your regular hourly rate in every pay packet. If your employer uses this method, your payslip must clearly show the rolled-up holiday pay as a separate item.
How zero hour contracts and holiday pay are handled by HMRC
Whether you take the time off or receive rolled-up pay, zero hour contracts and holiday pay are treated as taxable earnings. It is subject to standard Income Tax and National Insurance contributions just like your regular wages, and must be reported to HMRC via the PAYE system.