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. In this updated guide, we’ll walk you through who casual workers are, how to handle pay calculations for various work patterns, and how to stay compliant with 2025 legislation.

All workers in the UK, including casual and zero-hours workers are entitled to 5.6 weeks of holiday per year – this is known as statutory holiday entitlement. For full-time workers this is 28 days a year.

For casual workers holiday pay must be calculated on the hours they’ve actually worked – often referred to as a “pro-rata” or “pay-as-you-go” basis.

The Employment Rights Act 1996 still applies to many of these rights, so all workers – including casual ones – get fair treatment. This includes holiday pay, rest breaks and protection against unlawful deductions.

There are now two primary methods to calculate holiday pay for casual workers in 2025:

Method 1: The 52-Week Average Pay Calculation (ACAS Recommended)

This is the legally preferred method. You must calculate average weekly earnings over a “reference period” of the last 52 paid weeks (excluding unpaid weeks). Here’s how it works:

Example:

• A casual worker earns the following over 10 paid weeks:
  • £150, £120, £180, £200, £160, £140, £190, £175, £130, £165
• Average pay = (£150+£120+…+£165) ÷ 10 = £161
• Holiday pay = £161 x 5.6 weeks = £901.60 per year (if they continued working regularly)

This method ensures holiday pay reflects actual earnings, including overtime, bonuses, and shift premiums. It’s especially useful for casual workers with varied hours and fluctuating pay.

Method 2: The 12.07% Accrual Method (Still Common, Use with Caution)

Holiday pay can also be calculated as 12.07% of total hours worked. This method assumes that workers do not take holiday during employment but instead receive it as an additional amount.

Why 12.07%?

• The working year = 52 weeks – 5.6 weeks holiday = 46.4 weeks
• 5.6 ÷ 46.4 = 12.07%

Example:

• A casual worker works 40 hours in a week
• Holiday hours accrued = 40 x 12.07% = 4.83 hours
• Holiday pay = 4.83 hours x hourly rate (e.g., £12) = £57.96

If you choose this method, make sure it complies with the most recent legal rulings and that your workers agree to this setup. Rolled-up holiday pay (i.e., adding holiday pay into hourly pay instead of giving time off) is only lawful if shown separately and transparently on the payslip.

Rolled-up holiday pay has been contentious, but as of 2024 reforms, it can now be used for irregular-hour or part-year workers if stated clearly in the employment contract and payslip. This means workers receive their holiday pay alongside their wages, rather than when they take time off.

It must be calculated using a lawful percentage (e.g., 12.07% of earnings) and displayed separately from wages. Misuse of this system can result in non-compliance.

Yes, you can still use the 12.07% method in some cases – but it must now be used as rolled-up holiday pay for workers on irregular or part-year contracts. This means the holiday pay is included with each payslip as a separate item and not paid when the holiday is actually taken.

However, ACAS and government guidance now recommend using a 52-week reference period to calculate holiday pay based on average weekly earnings. This method provides a fairer reflection of a worker’s actual earnings and ensures compliance with current legislation. Weeks with no pay must be excluded from this calculation.

Employers must be cautious when using 12.07% to avoid underpaying or misrepresenting leave entitlement. It’s essential to ensure transparency and legal clarity, especially when dealing with irregular working hours.

According to updated ACAS guidance, holiday pay must reflect normal pay, taking into account work patterns. Here’s how to handle different scenarios:

• Casual workers: Use the 52-week average method or 12.07% method with proper safeguards.
• Part-year workers: Also use a 52-week reference period, even if they’ve worked fewer than 52 weeks.
• Shift workers: Include shift premiums, overtime, and bonuses in the average weekly pay.

This ensures leave entitlement is calculated fairly and consistently across your workforce.

Example: Calculating Holiday Pay for a Casual Worker with Irregular Hours

Scenario:

A casual worker has worked 40 of the last 52 weeks, with no earnings during 12 weeks (e.g. gaps in seasonal work). Over those 40 paid weeks, they earned a total of £9,600 through a mix of standard hours, overtime, and bonuses.

Step-by-step calculation:

1. Determine the total pay over the last 52 weeks (excluding unpaid weeks):
   £9,600 earned over 40 paid weeks

2. Calculate the average weekly pay:
   £9,600 ÷ 40 weeks = £240 average weekly pay

3. Apply the statutory holiday entitlement (5.6 weeks):
   5.6 weeks × £240 = £1,344 annual holiday pay

If the worker takes one week of leave:

They should receive £240 in holiday pay for that week, as this reflects their “normal pay” under the reference period.

Important Notes:

• This method complies with 2024/2025 guidance.

• Do not include any week where the worker wasn’t paid (e.g. no shifts or leave without pay).

• Include all pay types that form part of “normal remuneration”: overtime, shift premiums, commission, and regular bonuses.

Casual workers are entitled to 5.6 weeks of paid holiday per year, calculated on a pro-rata basis. The actual days or hours depend on how much they’ve worked.

Example:

• A casual worker averages 10 hours per week
• Holiday entitlement = 10 hours x 5.6 = 56 hours of paid holiday per year

Keep in mind that statutory holiday entitlement includes bank holidays unless otherwise stated in the contract.

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.

The legally compliant method for holiday pay calculation in 2025 is to use the worker’s average weekly pay over the last 52 paid weeks – known as the reference period. If the worker hasn’t been paid in a week, that week is skipped and replaced by the most recent previous paid week.

Include in the pay calculation:

• Overtime (if it’s regular)
• Commission
• Shift premiums
• Bonuses (if part of normal pay)

Example:

• A worker was paid in 40 of the last 52 weeks, earning £9,200 in total.
• Average weekly pay = £9,200 ÷ 40 = £230
• Holiday pay for one week off = £230
• Statutory leave entitlement = 5.6 x £230 = £1,288 annually

This method ensures the pay calculation reflects actual earnings and fairly compensates for all working patterns.

All workers in the UK are legally entitled to 5.6 weeks of statutory holiday per year. For someone working five days a week, this equals 28 days. This may include bank holidays, depending on your contract.

For part-time or casual workers, holiday entitlement is calculated on a pro-rata basis. This means it reflects the number of days or hours actually worked.

Example:

• A worker averages 3 days per week.
• Leave entitlement = 3 x 5.6 = 16.8 days of paid holiday per year

Employers must calculate and apply this fairly, using either the 52-week reference period or a clear rolled-up holiday pay method, depending on the working pattern.

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.

Are casual employees covered by workers’ compensation?

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.

Why is it difficult to work out how much annual leave casual workers have?

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.

What is Pro-rata Holiday Entitlement?

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.