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Holiday Calculations for Zero Hours Contracts

Holiday Calculations for Zero Hours Contracts

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We employ a number of staff on zero hours contracts and currently calculate their holiday entitlement based on the actual hours they work.  Holiday for zero hours staff is accrued at the same rate as permanent staff which falls between 0.084615 - 0.103846 hours for every hour worked (which equates to 22 - 27 days basic holiday entitlement per year depending on service).

Permanent employees receive an allowance for bank holidays and all bank holidays have to be booked as holiday if the employee would normally be working but isn't. How does bank holiday allowance work for a zero hours employee who doesn't have a working pattern or contracted hours?  We don;t currently give them any holiday allowance which probably isn't correct.

One thing spring to mind in relation to the expected change to the WTR which will allow staff to accrue holiday whilst on sick leave.  Bearing in mind that a zero hours employee accrues holiday based on the actual time worked (and not contracted hours as they don't actually have any contracted hours), how will this work if they take sick leave?

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By mr glide
02nd Dec 2009 09:19

The most common and simplest way to calculate holiday entitlement, is on an as and when your 'zero hours' employees work, basis.
Take the gross pay earned and multipy or gross it up by a further 12.07%. This additional calculated pay is then processed as holiday pay.
The percentage is calculated as follows; 5.6 weeks' holiday, divided by 46.4 weeks (being 52 weeks - 5.6 weeks) X 100 = 12.07 (The 5.6 weeks are excluded from the calculation as the employee would not be at work during those 5.6 weeks in order to accrue annual leave)
So if your employee earns a gross pay of £100 for hours worked, then the holiday pay part is calculated as £100 x 12.07% = £12.07
In terms of accruing annual leave whilst on sick leave, you would need to establish a working pattern for your zero hours employees first. Once you have done this, you could then apply the calculation as above.

Check out the HMRC and Business Link websites for further guidance

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By kansel
02nd Dec 2009 14:35

Whilst I understand the concept of applying a fixed percentage, how does this leave the business in relation to unfair treatment of zero hours workers?

Applying a flat % rate regardless of length of service could mean that the zero hours worker will accrue holiday at a lesser rate than their fixed contracted hours part time colleagues.

Our staff get basic holiday of between 22 - 27 days (plus bank holidays) based on service.  If you include the 8 bank holidays on top this works out to be 30 - 35 days holiday which based on our contracted full time week of 40 hours per week (2080 per year) is a holiday % that varies between 11.53% and 13.46%.

To ensure that all staff are treated equally should we not apply the same percentage holiday to zero hours as we do to their part time fixed contracted hours colleagues?

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By mr glide
03rd Dec 2009 11:40

The 5.6 weeks assumes the statutory 28 days leave per year (inc bank holidays in most cases)

Clearly, if your organisation awards additional days leave due to length of service, contractual terms etc, then apply the relevant percentage, but again on a fixed basis.

So 27 days leave plus 8 days bank holidays, as you rightly point out, would equate to 15.55% of gross pay.

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By denise_ clark
05th May 2010 16:28

Hi

Can anyone suggest how to calculate sick pay for a zero hours worker who has no fixed pattern?  What would the qualifying days be?  If the person works 2 days one month then a few months later does another day and so on.

Comments/suggestions would be appreciated.

Denise

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