How Does Holiday Pay Work on a Zero Hour Contract

In today`s gig economy, zero hour contracts have become increasingly common. These contracts allow employers to hire workers on an as-needed basis, with no minimum hours or guaranteed income. However, despite the flexibility they offer, zero hour contracts can raise many questions for employees, particularly when it comes to holiday pay.

So, how does holiday pay work on a zero hour contract?

Firstly, it`s important to note that all workers, regardless of their employment status, are entitled to a minimum of 5.6 weeks of paid holiday per year. This is equivalent to 28 days for someone working five days a week. This annual entitlement may be pro-rated for part-time workers or employees working irregular hours.

When it comes to zero hour contracts, holiday pay should be calculated based on the average hours worked over the last 52 weeks. If the employee has worked fewer than 52 weeks, the average should be based on the hours worked to date.

To calculate the rate of holiday pay, divide the total pay (excluding overtime) in the 52 weeks by the number of hours worked in that period. This will give you the hourly rate of pay for holiday. For example, if an employee earned £20,000 in the last 52 weeks and worked 1,000 hours, their hourly rate of pay for holiday would be £20 per hour.

It`s important to note that holiday pay should also include any regular overtime, commission, or bonuses. However, if an employee receives irregular payments or benefits, such as a bonus that varies from month to month, these should not be included in the calculation.

Employees on zero hour contracts can also request holiday pay in advance. They may want to do this to avoid a sudden loss of income when they take time off. In this case, the employer can agree to pay holiday pay in advance, based on an estimate of the hours to be worked.

Finally, it`s worth noting that employers cannot replace paid holiday with a higher hourly rate of pay. This means that a worker cannot agree to forgo their holiday entitlement in exchange for a higher hourly rate of pay.

In summary, employees on zero hour contracts are entitled to holiday pay, which should be calculated based on their average hours worked over the last 52 weeks. Holiday pay should include any regular overtime, commission, or bonuses. Employees can also request holiday pay in advance, but employers cannot replace paid holiday with a higher hourly rate of pay.