IMPORTANT: Contract amendments required for Zero Hours,  Irregular Hours and Term Time workers

Following a recent  Supreme Court ruling (Harpur Trust v Brazel) workers who are employed on an ongoing Zero Hours, Irregular Hours or Term Time contract basis are entitled to the full, minimum statutory holiday entitlement of 20 days plus 8 bank holidays / 5.6 weeks per year, regardless of the fact that they only work for a proportion of the year.  (This does not apply to part time workers who work fixed hours and days – they should still receive their holiday entitlement pro-rata).

In addition, holiday pay must now be paid when the worker takes their annual leave and be paid at the worker’s average rate of pay over the previous 52 weeks.

Further details regarding the changes and requirements are provided below.

In summary this means that:

  1. If you are currently spreading holiday pay over the year by adding an amount (eg 12.07%) on top of your worker’s weekly / monthly pay (often referred to as “rolled up holiday pay”) or you are saving any holiday pay in a pot for the worker to draw down upon request, then you need to stop doing this ASAP as you are breaching employment law.
  2. You need to review the wording in your contracts for Zero Hours, Irregular Hours or Term Time workers and ensure that they accurately reflect the changes.
  3. You need to write to any impacted employees to inform them of the changes.

Important – The risk: Please be aware that you may be at risk of a backdated claim for holiday pay owed. Currently employees are able to submit a backdated claim for up to 3 months, however a further case is currently with the Supreme Court which may set a precedent for employees to submit claims going back further in time.

If you need any help or advice regarding this, please get in touch.

ns@nickysilverhr.co.uk

07913 121290

Holiday Pay Calculations for Zero Hours,  Irregular Hours and Term Time workers

When an employee or worker takes holiday, they should get the same level of pay when they’re on holiday as when they’re at work – whatever their working pattern.

Important Note Regarding Holiday Entitlement: In a recent  Supreme Court ruling (Harpur Trust v Brazel) those who are employed on an ongoing Zero Hours,  Irregular Hours or Term Time contract are still entitled to the full, minimum statutory holiday entitlement of 20 days plus 8 bank holidays / 5.6 weeks per year, regardless of the fact that they only work for a proportion of the year.  (This does not apply to part time workers who work fixed hours and days – they should still receive their holiday entitlement pro-rata).

This means that for holiday pay calculations, if you are currently spreading holiday pay over the year by adding an amount eg 12.07% on top of the worker’s weekly / monthly pay (often referred to as “rolled up holiday pay”) or saving any holiday pay in a pot for the worker to draw down upon request, then you need to stop doing this ASAP, as holiday pay calculations made this way are incorrect and could put you at risk of a backdated claim for holiday pay owed. Workers must be paid for their holiday when they take it and their holiday pay must be calculated in line with the guidelines below. An example of how to complete a calculation is provided in Appendix A. You will see that there is an extra calculation step to complete if you pay your workers monthly.

For casual workers with no normal hours, including workers on Zero Hours,  Irregular Hours or Term Time contracts, the holiday pay they receive will be their average pay over the previous 52 weeks during which they have completed paid work for the Company (weeks when they have not worked / have not earned anything do not count). This may mean that the actual reference period takes into account pay data from further back than 52 weeks from the date of their leave. However, you should not go back any more than 104 weeks. If going back 104 weeks gives fewer than 52 weeks pay data to take into account, then the reference period is shortened to that lower number of weeks.

If a worker has not been in employment for long enough to build up 52 weeks’ worth of pay data, then you should use however many complete weeks of data they do have. For example, if a worker has been with you for 26 complete weeks, that is what you should use.

Alternatively to remove the requirement to complete these calculations, you could offer your workers a contract with fixed days and hours of work, meaning that they become a part time employee and their holiday entitlement is applied in the same way, but at a pro rata rate, of a full time employee. 

Further information:

General guidance on holiday pay calculations can be found at: calculating-holiday-pay

Full details can be found here: calculating-holiday-pay-for-workers-with-irregular-hours

Appendix A: Calculating holidays for workers on Zero Hours,  Irregular Hours or Term Time contracts

  • Monthly Paid Workers – Start from Step 1 below as they require an additional calculation. 
  • Weekly Paid Workers – Start from Step 2 below. Note: if a worker’s pay is calculated by a week ending with a Wednesday, then you should treat a week as starting on a Thursday and finishing on a Wednesday.

How to calculate

Step 1 (monthly paid workers only) – Work out what their weekly pay has been for each of the previous 52 weeks when they have completed paid work for the Company. 

NOTE: Definition of a ‘week’ for the purpose of the holiday pay reference period – a week should start from the last whole week worked from Sunday to Saturday ending on or before the first day of the holiday / leave. In the case of a worker paid monthly, if that worker takes a day’s leave mid-week then the first week used to calculate their holiday pay will be the preceding week’s pay earned between Sunday and Saturday.

The maximum time frame to work backwards in order to identify 52 worked / paid weeks is 104 complete weeks prior to the first day of the worker’s holiday. If, when working back by 104 weeks, you identify that there were less than 52 worked  / paid weeks, then use all of the worked / paid weeks that you have identified during that 104 week period for the calculation instead.

Example:

In a month a worker earns £1,250 and works 130 hours:

  • 25 hours in week 1
  • 20 hours in week 2
  • 35 hours in week 3
  • 35 hours in week 4
  • 15 hours in week 5 (only part of the week falls in the month)

Average hourly pay = £1,250 ÷ 130 = £9.62

  • pay for week 1 = £9.62 x 25 hours = £240.38
  • pay for week 2 = £9.62 x 20 hours = £192.31
  • pay for week 3 = £9.62 x 35 hours = £336.54
  • pay for week 4 = £9.62 x 35 hours = £336.54

To calculate the pay for the week which falls across 2 months, data from both months would have to be used.

Step 2 – Calculate their average weekly pay over the 52 working week period (If the worker hasn’t been there for 52 weeks, use data from all previous weeks where they have completed paid work for the Company)

Example:

Week(s) Gross pay per week Paid / Unpaid week

1 £300 Paid

2 – 5 £350 Paid

6 £0 Unpaid

7 £10 Paid

8 – 22 £100 Paid

23 – 25 £0 Unpaid

26 – 40 £400 Paid

41 – 45 £200 Paid

46 – 48 £0 Unpaid

40 – 54 £180 Paid

55 – 59 £150 Paid

You should discount weeks 6, 23-25 and 46-48 in the above table, which is 7 weeks in total, as there was no pay in these weeks, reflecting that the worker performed no work. As 7 weeks have to be discounted, you must go back a further 7 weeks to take the total to 52 weeks of pay data when calculating holiday pay for this period. These extra weeks are weeks 53-59 in the table.

The total pay over the 52 weeks is calculated by summing the pay for each week. The calculation is:

(1 × £300) + (4 × £350) + (1 × £10) + (15 × £100) + (15 × £400) + (5 × £200) + (6 × £180) + (5 × £150) = £12,040.

This is then divided by the 52 weeks-worth of data used to calculate the average (if you don’t have 52 weeks of data, divide by the number of weeks that you do have): £12,040 ÷ 52 = £231.34.

A week’s holiday taken in the week following would therefore be paid at a rate of £231.34

Step 3 – Calculate average day rate if the worker is taking less than one complete week’s holiday

Once you have worked out the weekly average pay, divide it by 5 to identify the amount to be paid for each day of holiday taken in that particular period. 

*NOTE: The work week is defined as 5 working days from Monday to Friday and the weekend is Saturday and Sunday.

Example

Average weekly rate of pay over previous 52 worked / paid weeks = £231.34

£231.34 divided by 5 working = each 1 day of holiday being taken at this time is paid at £46.27

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.

Add Your Heading Text Here

Add Your Heading Text Here