Holiday Pay for Casual Workers: UK Guide and Calculator
Payroll can be stressful for any organisation: large amounts of variable data must be processed correctly and quickly. Your team may also have to calculate holiday entitlement and pay for casual workers; this only adds stress because it’s crucial to remain legally compliant and satisfy employees.
Most organisations calculate holiday entitlement for part-time, casual, or zero-hour contract workers by calculating their work hours over the last three months and then calculating entitlement pro rata. However, suppose you have more than 10 atypical-hour workers. This creates several hours of work, gathering information from timesheets, payroll summaries, and workers' files, collating and calculating hours and entitlement for each person separately.
In this article, we will explore how holiday pay for casual workers: what they are entitled to, how to calculate this, and calculations that can improve your processes for error-free holiday pay at speed and scale.
What is Casual Holiday Pay?
Unlike traditional employees with set hours and salaries, casual workers' compensation can vary widely, creating challenges in determining fair holiday pay. Casual holiday pay is how much pay or holiday days casual workers are entitled to based on their work hours in the last 52 weeks.
Other Common Questions
Do Zero-Hour Contracts Get Holiday Pay in the UK?
Yes, individuals on zero-hour contracts in the UK are entitled to holiday pay. They accrue holiday time in proportion to their work hours, equating to a statutory minimum of 5.6 weeks paid annual leave, calculated on their average earnings over a reference period.
Do Employers Have to Pay Holiday to Zero Casual Workers in the UK?
Employers must provide holiday pay to casual workers, including those on zero-hour contracts. The amount is typically based on the average pay received by the worker in the previous 12 weeks in which they were paid.
Do Casual Workers Need to Be on Payroll?
Casual workers should be on the payroll to ensure accurate holiday pay calculation and payment. They must receive payslips that detail their pay and any deductions, ensuring transparency in their compensation, including holiday pay.
Are Casual Workers Entitled to Holiday Pay?
In the UK, casual workers are entitled to statutory holiday pay based on their hours worked. This entitlement is protected by law regardless of hours, contract type, or other employment status indicators. Employers are responsible for maintaining detailed records of the hours worked, which are used to calculate holiday entitlement and pay correctly.
Holiday Pay Entitlement for Casual Workers
The legal framework covers casual workers' holiday entitlement and includes reforms specifically addressing the calculation of their holiday pay from 1 January 2024.
Leave Year Reforms: For leave years starting from 1 April 2024, casual workers with variable hours or part-year contracts are eligible for up to 5.6 weeks of paid holiday.
Calculation Method: The amount of holiday pay for workers without fixed hours or pay is determined by calculating their average pay over a reference period.
What each casual worker is entitled depends on the hours they have worked. Casual workers can calculate their paid holiday entitlement based on their hours worked using the government’s holiday calculator.
Further Reading: Zero Hours Contract Holiday Pay
Calculating Casual Workers Holiday Pay
Casual workers' holiday pay should equal their average pay during the last 52 weeks of employment. If the worker has not been employed for a full year, the employer should use the total weeks available. Traditionally, this reference period has been the 12 weeks leading up to the holiday. However, recent updates have extended this reference period to ensure a fairer representation of their working pattern.
To give a simplified example, if an employee worked all year, they would be entitled to 5.6 weeks of paid holiday, but if they worked part-time at all during that year, this is pro-rated at 12.07% of hours worked.
See our example for a worker’s hours, holiday accrual and entitlement in January below:
How to Calculate Holiday Pay for Casual Workers
When casual workers have a pattern of consistent hours per week, holiday pay can be calculated by determining the average weekly pay; for example, weekly holiday pay = sum of last 52 weeks' pay / 52. Those without standard hours are based on an average pay received during the prior 52 weeks, excluding unpaid weeks.
An easy way to calculate holiday pay is the percentage method, where 12.07% is the standard percentage of the hours worked. This derives from the standard working year of 46.4 weeks (52 weeks minus 5.6 weeks holiday), with 12.07% representing the proportion of the holiday relative to the working year.
Example:
Total hours worked in the reference period: 130 hours
Total pay in the reference period: £1,250
Average hourly pay: £1,250 / 130 hours = £9.62
Holiday pay for a typical week would be: 25 hours x £9.62 = £240.50
However, while previously popular, calculating holiday entitlement as 12.07% of hours worked is now considered outmoded post-Brazel v The Harpur Trust (2022). It’s, therefore, best to average pay and holiday pay based on the hours worked in the last 52 weeks, which makes accurate timekeeping more important than ever.
Even if you use software tools to automate calculations, you must ensure changes in legislation are monitored and calculations adjusted accordingly. The above pay calculation includes bank holidays as part of the statutory holiday entitlement.
If you’re in any doubt, employers are advised to review guidelines from GOV.UK or Acas to ensure compliance with current regulations.
Further Reading: Holiday Pay When Leaving a Job
How PARiM Can Help You Calculate Casual Worker Holiday Pay
To calculate accurately, an employer must ensure that all the hours worked by the casual staff are correctly recorded. Missing data can lead to underpayment, which can result in legal consequences. Naturally, manual records tend to lead to issues, unnecessary stress, and delays.
PARiM recognises different types of holiday or leave calculation challenges and helps you by allowing you to manage holiday by the day, half day, hours or on an accrual basis company-wide or by individual. To find out more visit the in-depth page introducing our Absences module.
How Holiday Entitlements Work in PARiM
Company-wide absence settings in PARiM
PARiM allows you to enter a holiday allowance company-wide or by individual so if your calculation shows they are entitled to less than the full allowance its easily entered in their staff profile.
Holiday Entitlements and Pay for Casual Workers
Can be entitled to holiday pay accrued as they work. They can be entitled to 5.6 weeks of holiday per year. This would leave 52-5.6 = 46.4 weeks of work and therefore industry-standard holiday accrual percentage is 5.6/46.4 = 12.07%
Setting a different accrued percentage on a worker´s profile in PARiM
Within Absence Settings, PARiM allows you to enter a standard companywide sector-specific percentage like the 12.07% above, or if you need to, you can enter a different percentage of each worker’s profile.
Holiday Entitlements and Pay for Zero Hour Contract Workers
People on zero-hours contracts provide a further challenge when calculating the holiday that they have accrued as they work variable hours and irregular shifts or shift patterns. Indeed, in the Retail Sector, it’s not uncommon that these workers may well not just work different shifts but also different positions from week to week such as cashier one week and assistant manager the next.
PARiM can help you with your absence calculation in two ways for zero hours contract workers. If they are entitled to a number of hours absence per month or year then when you enter an absence, PARiM highlights the shift hours that you are about to replace so helping you enter the correct length of absence.
Within a staff member’s profile, you can also enter the standard day length so that when you enter an absence, PARiM will prompt you with the number of hours and the rate that should be paid for the absence. You can also set these staff to accrue holiday based on a percentage and PARiM automatically accrues the holiday or leave entitlement per hour worked. You can then see this and so can the staff member.
