Calculating Holiday Pay for Casual Workers

While it’s pretty easy to work out the holiday pay and allowance for full-time workers, (remember they’re entitled to 28 days off a year), it can be very challenging to work out holiday pay for casual workers. 

There are over 5 million casual workers in the UK, and understanding how to calculate casual workers’ annual leave is crucial, especially if you work in HR or management. Thankfully, this blog will explain who casual workers are, the holiday pay system and how you can calculate holiday allowance for your casual workers.

The Employment Rights Act 1996 establishes essential legal protections for employees and workers in the UK, including those in casual employment or engaging in casual labour. This Act outlines the fundamental rights of workers, such as receiving fair wages, having access to written employment contracts, and entitlement to paid leave.

For casual workers, the Act provides clarity on the definition of a worker and the rights they are entitled to, such as national minimum wage and paid holiday leave. Additionally, the Act enforces protection from unfair dismissal, ensuring that even those in casual employment are safeguarded against exploitation. Employers must adhere to this Act when offering work under flexible or zero-hour arrangements.

The Employment Rights Act 1996 serves as a critical framework to balance the flexibility of casual labour with the legal and ethical responsibilities of employers.

A casual worker or a zero hours worker is an employee who is employed on an ad-hoc basis. They are not permanently on the payroll and no work is obligatory. This means that they can accept or refuse the work that they are offered.

Zero-hour contracts are a perfect example of a casual employer/employee contract. They’re necessary in industries that need more workers at certain points of the year, such as farming or tourism. 

These zero-hour contracts ensure that working hours can be quickly doled out on short notice. However, because of the flexible nature of these contracts, calculating annual leave per hour worked can be more challenging compared to employees on a fixed contract.

How to calculate holiday pay for hourly workers? The 12.07% method is often the answer. The standard working year is 46.4 weeks which is 52 weeks – 5.6 weeks of holiday. 5.6 weeks is 12.07% of 46.4 weeks, and 12.07% of each hour worked is accrued holiday. 

This calculation includes bank holidays so workers should not get any further entitlement for these. If you use this method, for every hour worked, a worker receives seven minutes of holiday. 

Additionally, if you offer contractual holiday on top of the statutory amount, you will need to adjust the percentage to include this and so you can ensure that the holiday allowance is accurate.

Yes, you can still use the 12.07% method to calculate holiday pay for casual workers. However, it’s important to ensure that it aligns with the latest legal guidelines and accurately reflects the number of hours worked by the employee. 

The latest legal guidelines suggest that employers, including those employing contract workers, should calculate holiday pay based on the average weekly earnings over the last 52 weeks. You should exclude any weeks where no work was done, to ensure fairness and compliance. This method ensures that all workers, whether casual or contract workers, receive their full 5.6 weeks paid holiday entitlement.

To calculate holiday pay for workers who do irregular hours, you should look at the reference period of the past 52 weeks to determine the average number of hours worked. 

If the worker has been employed for less than a year, the reference period will be shortened and exclude any weeks where no work was done. This method helps ensure that the holiday entitlement is proportional to the time worked.

Even though they don’t have to accept the work when offered, casual workers still have workers’ rights. They have the right to the national minimum wage, paid time off and other employment rights that full-time and part-time workers are legally entitled to as well.

No matter how irregularly you work or if you don’t work many hours, if you’re classified as a worker, you’re entitled to workers’ rights.  

According to the law all workers are entitled to: 

• The national minimum wage
• Paid annual leave
• Statutory minimum length of rest breaks
• Right to refuse work of more than 48 hours per week
• Protection against discrimination and unlawful deduction from wages
• Protection for whistleblowing

Yes, it is possible to pay casual workers in cash; however, employers must ensure the payment complies with UK tax and employment laws. Employers are required to maintain proper records of the payments and deduct the necessary Income Tax and National Insurance contributions via PAYE (Pay As You Earn). Failure to report cash payments can lead to penalties for tax evasion. Paying cash doesn’t exempt the employer from their legal obligations, such as ensuring casual labour workers receive proper holiday pay and a payslip.

Every employee is entitled to at least 5.6 weeks of statutory annual leave. For full-time employees, this works out to 28 days a year. For everyone else, including casual workers, the amount of holiday leave is calculated on a pro rata basis. 

The number of holiday hours a worker is entitled to is based on the number of hours they work on average. You should look over the past 52 weeks of their employment to calculate the average amount of working hours. 

However, if you’re trying to calculate the amount of holiday allowance for someone who has been working for less than a year, the reference period is shortened and will not include any periods that they did not work.

It can be quite difficult to calculate casual workers’ annual leave – and not just from a maths perspective. There are a few issues which may trip you up when you’re figuring out how much holiday pay your employees are allowed.

• Firstly, the government guidance on calculating holiday entitlement for employees with irregular working hours is rather vague. While according to the government, it is mandatory for employees to give 5.6 weeks of holiday leave annually, they give little guidance on how to calculate it. 
• Secondly, full-time workers know how much holiday they’re entitled to every year. They can request holiday before they start in a new position, but casual employees don’t have the same amount of freedom because they can’t predict how much annual leave they will have every year. 
• Thirdly, it can be difficult to calculate holiday leave during periods when workers aren’t working, since casual workers might have large gaps throughout the year when they have no shifts.

How to calculate holiday pay for hourly workers? The 12.07% method is often the answer. The standard working year is 46.4 weeks which is 52 weeks – 5.6 weeks of holiday. 5.6 weeks is 12.07% of 46.4 weeks, and 12.07% of each hour worked is accrued holiday. 

This calculation includes bank holidays so workers should not get any further entitlement for these. If you use this method, for every hour worked, a worker receives seven minutes of holiday. 

Additionally, if you offer contractual holiday on top of the statutory amount, you will need to adjust the percentage to include this and so you can ensure that the holiday allowance is accurate.

To determine how holiday pay is calculated, you need to know the average weekly earnings of your employee. This includes all overtime, bonuses, and commissions over the past 52 weeks. If the employee has been with you for less than 52 weeks, use the average over their employment period to calculate holiday pay. For casual workers, calculate their average pay over the last 52 weeks they were paid to ensure accurate holiday pay. 

This method ensures you account for fluctuating work hours and provides a fair calculation of their holiday entitlement. The calculation should reflect the true nature of their earnings, incorporating any irregularities in their work schedule. Using this approach, employers can ensure that casual workers receive a fair holiday pay that is proportionate to their actual earnings and work patterns. This not only complies with legal requirements but also promotes fairness and transparency in how holiday pay is distributed among employees. 

In the UK, the basic holiday entitlement is at least 5.6 weeks of paid holiday per year for full-time workers, which equates to 28 days. This statutory entitlement includes public holidays, although employers can choose to offer more. For part-time or casual workers, the holiday entitlement is calculated pro-rata based on the number of hours or days they work. 

This ensures that all employees receive a fair amount of holiday leave relative to their working patterns. By calculating holiday entitlement on a pro-rata basis, employers can ensure that even employees with irregular or part-time hours receive their fair share of holiday leave. This method promotes fairness and equality in the workplace. Understanding and applying the basic holiday entitlement helps in maintaining compliance with employment laws.

Pro-rata holiday entitlement refers to the proportional amount of holiday leave that part-time or casual workers are entitled to, based on the hours or days they work compared to full-time employees. To calculate pro-rata holiday entitlement, multiply the number of days worked per week by 5.6 (the statutory holiday entitlement for full-time workers). For example, if an employee works three days a week, their pro-rata holiday entitlement would be 3 x 5.6, which equals 16.8 days of holiday per year. 

This method provides a fair distribution of holiday leave, ensuring that all employees receive holiday time relative to their working hours. Pro-rata calculations ensure that employees with varying work schedules are granted holiday leave in proportion to their actual work time. This approach promotes fairness and compliance with employment laws, making sure that every employee receives their rightful holiday entitlement based on their individual work patterns. 

Yes, casual employees are generally covered by workers’ compensation laws if they are classified as workers under the relevant legal definitions. This means they are entitled to compensation if they suffer a workplace injury or illness while performing their job duties. Employers must ensure that they comply with workplace safety standards and provide workers’ compensation coverage, even for those engaged in casual labour. The exact coverage and eligibility criteria may depend on the specifics of the casual employment arrangement and the nature of the work.

If you have any questions about calculating holiday pay for casual workers or any other aspect of payroll, contact us today!

You can also read more about our payroll services and the payroll software we use so that make all the calculations and management easier.