Holiday pay calculations change for zero-hours workers

From August 2019, employers are required to use an amended formula to calculate holiday pay for permanent casual, part-time and zero-hours workers. This supersedes previous ACAS guidelines that recommended using a basis of 12.07% of actual hours worked.

The Court of Appeal ruled in the case of The Harpur Trust v Brazel, that the correct method for calculating statutory holiday pay was to apply the formula in S224 of the Employment Rights Act (ERA) 1996. This means employers should base an eligible employee’s average salary (and working hours) on the 12 weeks preceding the holiday calculation day. More importantly, the 12-week period must ignore any weeks in which the individual was not paid.

This effectively means that staff who only work for part of the year will receive annual leave entitlements as if they worked for the whole year.

Organisations that employ people on zero-hours or casual contracts, where people only work part of the year, may need to consider:

  • whether to only employ any new staff for the weeks/months they work
  • whether to end the contracts of staff they currently employ (beware the risk of unfair dismissal).

HRSP is available to discuss these implications with its clients.