Legal changes have occurred affecting how we handle holidays for Irregular Hours Workers (aka. Casual or Zero Hours). This article explains how Kobas has implemented these changes.
Last updated 12 Apr 2023
- What is the legal basis for UK Holiday Entitlement?
- What has changed and why is it so complex?
- Why have I now got some strange holiday figures?
- Useful definitions
- Employer considerations and tips
- Further information
What is the legal basis for UK Holiday Entitlement?
The Working Time Regulations 1998 ensures that every worker in the UK has the right to 5.6 weeks of paid leave each year. Holiday continues to accrue whilst the contract is active, which includes during sick, parental, or sabbatical leave and during times when no work is undertaken. The amount a worker is paid for a week’s leave depends on their average working week.
Full-time workers (working 5 days per week) employed for the entire holiday year, receive their 5.6 weeks as 28 days leave per year paid at their regular daily rate. It’s worth noting that this minimum entitlement may be inclusive of Bank Holidays, and the entitlement may also be greater than 28 days. Any variants should be detailed in the contract.
Workers on regular part-time contracts receive 5.6 weeks leave per year but are paid in line with their average working week. For example, if a part-time worker earns £500 for 2 days work, when they take a full week of leave, they will receive £500 for that week of leave. This is often expressed as taking 2 days' leave but would equate to a full week for that worker, and that could be expressed as 11.2 days of holiday per year.
What has changed and why is it so complex?
It is complex to apply this method for those working on Irregular Hour Contracts (ie. Zero-hours, casual or time-limited contracts). The common practice in the UK has been for their leave to be accrued at a rate of 12.07% of the time they worked.
The Supreme Court issued a decision in July 2022 that reiterates that this practice of accrual is not fair or correct. The Court reiterated that Irregular Hours workers are also entitled to 5.6 weeks paid annual leave, which should not be pro-rated according to the number of hours they work.
This decision aims to ensure that Irregular Hours workers aren't disadvantaged from their contracted counterparts. Therefore, government guidance is now issued which explains that we should forecast what an average week would look like for an Irregular Hours worker and ensure they can take 5.6 of those weeks.
Why have I now got some strange holiday figures?
When we calculate the average week, we currently must exclude weeks that have not been worked. In some instances, this means that workers only working a few weeks or extremely erratic hours may be entitled to more holiday than would seem proportionate.
The government is currently consulting on whether to make a minor change to this method to include weeks where no work is undertaken. If this change is passed into legislation, fewer of the anomalies described above would occur.
Whilst the government is consulting on changes that address this anomaly, the calculations within Kobas comply with the current case law and guidance.
“Although logically we might think of the holiday as being a form of compensation for work actually done [ie. The more you work the more holiday accrues], this case confirms that holiday effectively builds up as time passes [ie. Holiday is accrued during the time that the employment contract is active]” (Sally Hulston, Colin Leckey, 2022).
We have adopted standard terminology within Kobas.
- Projected Full Year Allowance: This is the number of days of holiday you would be entitled to if you worked the full leave year, based on the average shift data Kobas holds.
- Total Days this Year: This number is your Projected Full Year Allowance plus any days carried over from the previous year and any days previously earned for this leave year from a previous contract.
- Projected Entitlement: This is the number of days of holiday you are likely to be entitled to this leave year, based on the averages of the data we currently hold. This figure will only differ from Projected Full Year Allowance where an employee’s contract commences part-way through a leave year. The calculation varies depending on at what point in the leave year the contract starts and ends. We also include any days carried over from the previous year and any days previously earned for this leave year from a previous contract. Following the Working Time Directive, you
- Accrual To Date: This figure is the proportion of the Projected Entitlement you have currently earned based on the data we currently hold.
- Average Shift Length: This is how we ensure that the day a worker takes is proportionate to the employee's normal work. For example, to take a week off work, a cleaner may only need 10hrs (5 x 2hrs) but a Chef may need 45hrs (5 x 9hrs).
- Holiday Pay: To further protect employees. The Good Work Plan (2020) states that all holiday pay should be paid at an average of an employee's pay for the last 52 weeks worked within the last 104 weeks. This will be advantageous to workers on variable pay rates, and those taking demotions.
Because entitlements are based on averages, if an employee's working pattern changes during their contract, then these values may change up or down. Where the shift patterns remain constant, the figures are less likely to change.
For individual employee calculations, we use the same Holiday Year as your company's leave year.
If you have previously earned holiday under a different contract (for instance if you spent part of the year on a Part-Time contract before moving to Irregular Hours) or you have carryover days (days of leave that you earned last year that you didn't use). This will be included in your accrual from the start because you have already accrued this prior to the start of this contract.
Employer considerations and tips
Whilst Kobas undertakes extreme due diligence in the execution of its HR function, we cannot be held liable for incorrect payments or functions. You should always seek the advice of your legal, HR or payroll professionals. However, these points will make useful considerations:
- When there is no work for an employee, consider completing the leaver process in Kobas. You can re-contract once you have work available.
- Always ensure your staff have accurate start and leave dates, contract type, pay rates and shifts recorded in Kobas.
- When varying the amount of work available to your Irregular Hours workers, consider the fact this will impact their holiday entitlement.
- Ensure that when you end contracts and start new ones, this is done correctly. You can find guidance on doing this correctly here.
- Irregular Hour staff will be able to see next year's Full Year Allowance and Projected Entitlement, but not book until that period has started. The staff can still book Days Off and convert that to Holiday once that year has started.
- The cost to the business of the Irregular Hour staff members' shifts will initially use an estimated cost, which will then be finalised the Tuesday after the rota has been completed.
- You can limit how many days staff can take beyond what they have accrued in Kobas System Preferences.