Zero hour contract holiday pay is a statutory employment law entitlement that applies regardless of how irregular or unpredictable a worker’s hours may be. While zero hour contracts are designed to offer flexibility, they do not remove an employer’s obligation to provide paid annual leave or to calculate holiday pay lawfully.
The legal position on holiday pay for zero hour contract workers has been subject to significant change in recent years. A series of court decisions restricted the use of percentage-based accrual methods, creating uncertainty for employers managing irregular hours workers. That position shifted again from April 2024, when new regulations reinstated lawful mechanisms for calculating holiday entitlement and pay for certain categories of worker.
At the same time, proposed employment law reforms, including changes to the regulation of zero hour contracts, have added further complexity. While no ban is currently in force, employers must continue to comply with the law as it stands, particularly when calculating and paying holiday pay correctly.
What this article is about
This guide explains how zero hour contract holiday pay works under UK law. It sets out who is entitled to holiday pay, how entitlement accrues, when the 12.07% method can be used, how holiday pay must be calculated and paid, and the key compliance risks for employers managing zero hour and irregular hours workers.
Section A: What Is Zero Hour Contract Holiday Pay?
Zero hour contract holiday pay refers to the statutory paid annual leave entitlement that applies to individuals engaged under zero hour working arrangements. Despite the absence of guaranteed working hours, workers on zero hour contracts are entitled to paid holiday under the Working Time Regulations 1998.
Holiday pay is distinct from holiday entitlement. Holiday entitlement refers to the amount of annual leave a worker is entitled to take, while holiday pay refers to the pay a worker must receive when that leave is taken. Both apply equally to zero hour contract workers, subject to the statutory minimum requirements.
Under UK law, most individuals engaged on zero hour contracts will qualify as “workers” rather than employees, although some may also have employee status depending on the nature of the relationship. Regardless of status, workers are entitled to a minimum of 5.6 weeks’ paid holiday per leave year. This entitlement cannot be excluded or reduced by contract.
Zero hour contract holiday pay is designed to ensure that workers are not financially disadvantaged when taking time off work. The core legal principle is that a worker should receive pay during annual leave that reflects what they would normally earn if they were working. This principle applies even where hours fluctuate or work is offered on an ad hoc basis.
For employers, this means that zero hour arrangements do not remove the obligation to calculate holiday entitlement accurately, to pay holiday at the correct rate, and to keep appropriate records. Failure to do so can result in unlawful deduction of wages claims and breaches of the Working Time Regulations.
Section Summary
Zero hour contract holiday pay is a statutory entitlement that applies regardless of working pattern. Employers must distinguish between entitlement and pay, ensure that all zero hour workers receive paid annual leave, and calculate holiday pay in line with the Working Time Regulations.
Section B: Legal Framework Governing Zero Hour Contract Holiday Pay
Zero hour contract holiday pay is governed primarily by the Working Time Regulations 1998, which establish the statutory right to paid annual leave for workers in the UK. These Regulations apply to most individuals engaged under zero hour contracts, regardless of whether they are classified as employees or workers for other employment law purposes.
Under the Working Time Regulations, workers are entitled to a minimum of 5.6 weeks’ paid annual leave in each leave year. This entitlement applies from the first day of work and cannot be replaced by an enhanced hourly rate or rolled-up holiday pay, except in limited circumstances permitted by law.
The Employment Rights Act 1996 provides the broader legal context for zero hour contracts by defining the nature of the contractual relationship. A zero hour contract is characterised by the absence of any obligation on the employer to provide work and the absence of any obligation on the individual to accept work. However, once work is accepted and performed, statutory rights, including the right to paid annual leave, arise.
The legal position on holiday pay for zero hour and irregular hours workers has been shaped by case law over time, particularly in relation to how holiday entitlement accrues and how holiday pay is calculated where working hours vary. Earlier judicial decisions restricted the use of percentage-based methods for calculating holiday pay, creating compliance difficulties for employers managing casual or irregular workforces.
To address this, the Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 introduced changes that took effect for holiday years beginning on or after 1 April 2024. These Regulations amended the Working Time Regulations to expressly permit alternative methods of calculating holiday entitlement and pay for certain categories of worker, including irregular hours workers and part-year workers.
Under the post-April 2024 framework, employers may lawfully calculate holiday entitlement for qualifying workers by reference to the hours actually worked, rather than relying solely on notional weekly or monthly accrual. For workers who do not fall within the statutory definitions for hours-based accrual, entitlement may still be calculated using a weeks-based approach that delivers the statutory minimum 5.6 weeks’ paid leave for the leave year, pro-rated to reflect the individual’s working pattern.
The Regulations also clarified how holiday pay should be calculated, including the continued use of a 52-week reference period for determining a week’s pay, ignoring weeks in which no remuneration was received.
It is important to note that the April 2024 changes do not remove the requirement to comply with the statutory minimum entitlement of 5.6 weeks, nor do they apply indiscriminately to all zero hour contract workers. Employers must assess whether a worker qualifies as an irregular hours worker or part-year worker before applying certain calculation methods, including percentage-based accrual.
Alongside these changes, the UK Government has announced proposed employment law reforms affecting zero hour contracts, including measures aimed at increasing predictability of working hours. While these proposals may affect the future use of zero hour contracts, they do not currently alter the legal framework governing holiday pay. Employers must therefore continue to apply the Working Time Regulations and associated amendments as they stand.
Section Summary
Zero hour contract holiday pay is grounded in the Working Time Regulations 1998, supported by the Employment Rights Act 1996 and amended by the April 2024 Regulations. While new rules expressly permit greater flexibility in calculating holiday for certain workers, employers must ensure the method used is lawful for the individual’s working pattern and delivers at least the statutory minimum entitlement.
Section C: Holiday Entitlement for Zero Hour Contract Workers
Zero hour contract workers are entitled to paid annual leave under the Working Time Regulations 1998 in the same way as other workers, despite the absence of guaranteed working hours. The statutory minimum holiday entitlement is 5.6 weeks per leave year, which applies irrespective of whether work is regular, irregular, or offered on an ad hoc basis.
Holiday entitlement begins to accrue from the first day a worker starts work. There is no qualifying service requirement before entitlement arises, and an employer cannot lawfully exclude or restrict a zero hour worker’s right to paid annual leave by contract. This applies even where work is sporadic or where the individual chooses not to accept every assignment offered.
For zero hour contract workers, entitlement must be pro-rated to reflect the amount of work actually undertaken during the leave year. Unlike full-time workers with fixed hours, entitlement is not expressed as a fixed number of days. Instead, it reflects the statutory 5.6 weeks’ entitlement, adjusted to account for variable or irregular working patterns.
In practice, entitlement accrual for zero hour contract workers is closely linked to the hours worked. Where a worker qualifies as an irregular hours worker or part-year worker under the post-April 2024 framework, holiday entitlement may be calculated by reference to the actual hours worked during the leave year. This ensures that the worker receives the equivalent of 5.6 weeks’ paid leave over the course of the year, without assuming a standard working pattern.
The irregular nature of zero hour work can raise questions about continuity of employment and its impact on statutory rights. While continuity of employment is relevant for certain employment rights, it does not determine whether a worker is entitled to paid annual leave for work already performed. Where a zero hour contract remains in place, entitlement continues to accrue based on work undertaken, even if there are periods during which no work is offered or accepted.
Employers should be cautious about assuming that a short gap in work automatically breaks continuity of employment. Whether continuity is preserved depends on the existence of an overarching contract and the factual circumstances of the relationship. In many cases, continuity will be preserved despite intermittent work, particularly where there is an ongoing expectation of future work.
Zero hour contract workers may also benefit from contractual holiday provisions that exceed the statutory minimum. Where enhanced holiday entitlement is offered, employers must ensure that it is clearly set out in the contract and applied consistently. However, contractual enhancements cannot reduce or replace the statutory entitlement.
Section Summary
Zero hour contract workers are entitled to 5.6 weeks’ paid holiday per year, pro-rated to reflect the work they perform. Entitlement accrues from day one and is not lost due to irregular hours or gaps between assignments. Continuity of employment may affect other rights, but it does not remove the right to paid annual leave for work already carried out.
Section D: How Is Zero Hour Contract Holiday Pay Calculated?
Calculating zero hour contract holiday pay requires employers to apply the statutory principle that a worker should receive pay during annual leave that reflects what they would normally earn if they were working. This principle applies regardless of how irregular or unpredictable a worker’s hours may be.
The method used to calculate holiday pay will depend on the worker’s working pattern and whether they fall within the statutory definitions of an irregular hours worker or a part-year worker under the post-April 2024 framework. These categories are particularly relevant for zero hour contract workers, as they allow employers to link holiday entitlement and pay directly to hours worked.
For holiday years beginning on or after 1 April 2024, the Working Time Regulations now expressly permit employers to calculate holiday entitlement for qualifying irregular hours and part-year workers using an hours-based accrual method. Under this approach, holiday entitlement accrues at a rate of 12.07% of the hours worked during the relevant pay period. This percentage reflects the statutory entitlement of 5.6 weeks’ paid leave relative to the remaining working weeks in a year.
It is important to note that the 12.07% accrual method is not automatically applicable to all zero hour contract workers. Employers must ensure that the worker genuinely meets the statutory definition of an irregular hours worker or part-year worker before applying this method. Where a worker does not qualify, holiday entitlement must still be calculated using a lawful alternative approach, such as a weeks-based method, that delivers the statutory minimum entitlement.
Holiday pay itself must be calculated using the concept of a “week’s pay” under the Working Time Regulations. For zero hour contract workers whose pay varies according to hours worked, a week’s pay is calculated by averaging the worker’s remuneration over the previous 52 weeks in which pay was received. Weeks in which no pay was received are ignored, and the reference period may extend back up to 104 weeks if necessary to identify 52 paid weeks.
Where a worker has not yet worked for 52 weeks, holiday pay should be calculated based on the number of weeks they have actually worked. This ensures that the holiday pay received accurately reflects the worker’s normal earnings, rather than an assumed or artificial working pattern.
Zero hour contract workers do not accrue holiday entitlement during periods in which no work is performed. Accrual is linked to actual hours worked. However, once entitlement has accrued, holiday pay must be provided when leave is taken and cannot be withheld or replaced by an enhanced hourly rate, except where expressly permitted by law.
Employers must ensure that holiday pay is paid at the time leave is taken, unless the working relationship has ended, in which case payment in lieu of untaken accrued holiday must be made. Accurate record-keeping of hours worked, pay received and holiday taken is essential to demonstrate compliance.
Section Summary
Zero hour contract holiday pay must reflect a worker’s normal earnings and be calculated in line with statutory rules. From April 2024, the law expressly permits hours-based accrual at 12.07% for qualifying irregular hours and part-year workers. Where this does not apply, employers must use an alternative lawful method that still delivers the statutory minimum entitlement.
Section E: Zero Hour Contract Holiday Pay Examples
Worked examples can help illustrate how zero hour contract holiday pay operates in practice and how statutory rules should be applied when calculating entitlement and pay. While the underlying legal principles remain the same, the calculations will vary depending on the number of hours worked and the worker’s average rate of pay.
Where a zero hour contract worker qualifies as an irregular hours worker or part-year worker, holiday entitlement may be calculated by applying the 12.07% accrual rate to the total hours worked during the relevant pay period. This method ensures that the worker receives the equivalent of 5.6 weeks’ paid holiday over the course of the leave year, proportionate to the work performed.
For example, if a zero hour contract worker has worked a total of 200 hours during a period of engagement, holiday entitlement would be calculated by applying the 12.07% rate to those hours. This results in 24.14 hours of paid holiday entitlement. If the worker’s average hourly rate of pay is £12, the holiday pay due for those accrued hours would be £289.68. This reflects the pay the worker would normally earn if they were working during that period.
Example 1: 200 hours worked
| Detail | Calculation | Result |
|---|---|---|
| Total hours worked | — | 200 hours |
| Holiday entitlement | 200 × 12.07% | 24.14 hours |
| Average hourly rate | — | £12.00 |
| Holiday pay due | 24.14 × £12.00 | £289.68 |
A further example illustrates the same approach where fewer hours are worked and the average hourly rate is lower. If a worker has worked 150 hours and has an average hourly rate of £10, applying the 12.07% accrual rate results in 18.11 hours of holiday entitlement. The corresponding holiday pay would be £181.10.
Example 2: 150 hours worked
| Detail | Calculation | Result |
|---|---|---|
| Total hours worked | — | 150 hours |
| Holiday entitlement | 150 × 12.07% | 18.11 hours |
| Average hourly rate | — | £10.00 |
| Holiday pay due | 18.11 × £10.00 | £181.10 |
These examples assume that the worker qualifies for hours-based accrual under the post-April 2024 framework. Where a worker does not meet the statutory definition of an irregular hours worker or part-year worker, employers must calculate holiday entitlement and pay using a different lawful approach. In all cases, the outcome must deliver at least the statutory minimum of 5.6 weeks’ paid annual leave and ensure that holiday pay reflects normal earnings.
Accurate records of hours worked and pay received are essential when applying these calculations. Employers should also ensure that workers understand how their holiday entitlement accrues and how holiday pay is calculated, as transparency helps reduce disputes and supports compliance.
Section Summary
Zero hour contract holiday pay calculations depend on hours worked and average earnings. Where hours-based accrual is permitted, the 12.07% method provides a lawful way to calculate entitlement. Employers must ensure the correct method is applied to each worker and that records support the calculations used.
Section F: Carry-Over, Accrued Leave and Payment on Termination
Zero hour contract holiday pay does not need to be taken immediately after it accrues, but it must normally be taken within the relevant leave year. As a general rule, workers do not have an automatic right to carry unused statutory holiday entitlement into the following leave year. However, UK employment law recognises a number of important exceptions that employers must apply correctly.
Carry-over of statutory holiday is permitted where a worker has been unable to take their leave for reasons beyond their control. This includes circumstances where the worker is absent due to sickness, on maternity leave or other family-related leave, or where the employer has failed to provide a reasonable opportunity to take holiday. In these situations, unused statutory leave may lawfully be carried forward into the next leave year.
The April 2024 amendments to the Working Time Regulations clarified and codified the position on carry-over. Where an employer fails to recognise a worker’s entitlement to paid annual leave, fails to encourage the worker to take that leave, or fails to pay holiday correctly, the worker may be entitled to carry over accrued but untaken holiday. This applies equally to zero hour contract workers and those working irregular or part-year patterns.
Employers must ensure that workers are informed of their holiday entitlement and the applicable leave year. Failure to communicate this information clearly can increase the risk that holiday will need to be carried forward. Clear policies, accurate records and proactive management of leave are therefore essential for compliance.
When a zero hour contract worker’s engagement ends, the employer must pay the worker for any accrued but untaken statutory holiday. This payment in lieu must be calculated in line with the worker’s accrued entitlement and their average earnings, using the same principles that apply when holiday is taken during employment. Payment in lieu of holiday is only lawful on termination and cannot be used as a substitute for allowing holiday to be taken during the working relationship.
Employers should also be cautious when considering rolled-up holiday pay. While the post-April 2024 framework permits rolled-up holiday pay in limited circumstances for qualifying irregular hours and part-year workers, strict statutory conditions must be met. Where those conditions are not satisfied, rolled-up holiday pay remains unlawful and exposes employers to compliance risk.
Section Summary
Zero hour contract holiday pay must usually be taken within the leave year, but statutory carry-over is permitted in defined circumstances, particularly where the employer is at fault. On termination, accrued but untaken holiday must be paid in lieu. Employers must manage carry-over and payment practices carefully to ensure compliance with the Working Time Regulations.
Section G: Future Reform and Zero Hour Contract Holiday Pay
Zero hour contracts remain an area of active policy debate in the UK, with proposed reforms aimed at increasing security and predictability for individuals working irregular hours. These proposals have included measures to restrict certain practices associated with zero hour contracts and to strengthen workers’ rights to greater certainty over their working patterns, rather than an outright prohibition on their use.
The Employment Rights Bill, as announced by the UK Government, is expected to introduce changes affecting zero hour contracts, including potential rights for workers to request contracts that better reflect their normal working hours. While these proposals may, if enacted, alter how zero hour contracts operate in practice, they do not currently change the statutory framework governing holiday entitlement or holiday pay.
Until any new legislation is formally enacted and brought into force, employers must continue to comply with the Working Time Regulations 1998 and the amendments introduced from April 2024. This includes ensuring that zero hour contract workers receive their full statutory holiday entitlement, that holiday pay is calculated using a lawful method, and that any hours-based accrual or rolled-up holiday pay arrangements are applied only where the statutory conditions are met.
Employers should also be mindful that future reforms may place increased emphasis on transparency, predictability and worker choice. This could lead to closer scrutiny of working arrangements that involve irregular hours, including how holiday entitlement and pay are managed. Employers who maintain clear records, transparent policies and compliant calculation methods will be better placed to adapt to any future changes.
Regularly reviewing contractual arrangements and holiday pay practices is therefore advisable, particularly where working patterns evolve over time. Where uncertainty arises, seeking specialist employment law advice can help employers manage risk and remain compliant during a period of potential reform.
Section Summary
While reforms to zero hour contracts are proposed, the law on holiday pay remains unchanged for now. Employers must comply with current statutory rules on zero hour contract holiday pay and ensure that calculation and payment practices remain lawful, while staying alert to future developments.
FAQs: Zero Hour Contract Holiday Pay
What is zero hour contract holiday pay?
Zero hour contract holiday pay is the statutory pay a worker must receive when taking annual leave under a zero hour working arrangement. It ensures that workers are paid during periods of statutory holiday, even where their hours are irregular or not guaranteed.
Do zero hour contract workers get holiday pay?
Yes. Zero hour contract workers are entitled to a minimum of 5.6 weeks’ paid holiday per leave year under the Working Time Regulations 1998. This entitlement applies regardless of how many hours they work or how unpredictable their working pattern may be.
Is holiday pay always calculated at 12.07% for zero hour workers?
No. The 12.07% accrual method may only be used where the worker qualifies as an irregular hours worker or a part-year worker under the post-April 2024 framework. Employers must assess whether the statutory conditions are met before applying this method.
How is zero hour contract holiday pay calculated?
Holiday pay must reflect what the worker would normally earn if they were working. For workers with variable pay, this is calculated using the average pay received over the previous 52 weeks in which pay was received, ignoring weeks where no pay was earned.
Do zero hour contract workers accrue holiday pay when they are not working?
No. Holiday entitlement accrues based on actual work performed. If no work is carried out, no additional entitlement accrues during that period. However, any entitlement already accrued remains available to be taken.
Can holiday pay be rolled up into an hourly rate?
Rolled-up holiday pay is only permitted in limited circumstances for qualifying irregular hours and part-year workers, and only where strict statutory conditions are met. Outside these circumstances, rolled-up holiday pay remains unlawful and carries compliance risk.
What happens to unused holiday if a zero hour contract worker leaves?
If a zero hour contract worker’s engagement ends, the employer must pay them for any accrued but untaken statutory holiday. This payment must be calculated using the same principles that apply when holiday is taken during employment.
Can employers refuse holiday requests from zero hour contract workers?
Employers may refuse holiday requests for valid business reasons, provided they give appropriate notice and the refusal is not discriminatory. Employers must still ensure that workers have a reasonable opportunity to take their statutory holiday within the leave year.
Conclusion
Zero hour contract holiday pay is a statutory entitlement that applies regardless of the flexibility or irregularity of a worker’s hours. Employers cannot rely on the absence of guaranteed work to avoid their obligations under the Working Time Regulations 1998. All zero hour contract workers are entitled to paid annual leave, and that leave must be calculated and paid in accordance with the law.
The changes introduced from April 2024 have provided greater clarity for employers managing irregular hours and part-year workers, including the express permission to use hours-based accrual methods in qualifying cases. However, these changes also require careful application. Employers must ensure that any calculation method used is legally appropriate for the worker’s status and working pattern and that holiday pay reflects normal earnings.
Incorrect holiday pay calculations remain a common source of legal risk. Failures to calculate entitlement accurately, to pay holiday correctly, or to allow workers a reasonable opportunity to take their leave can result in claims for unlawful deduction of wages and breaches of statutory rights.
By maintaining clear contractual terms, accurate records of hours worked and pay received, and transparent holiday policies, employers can reduce compliance risk and support fair and lawful working arrangements. Ongoing review is particularly important given the potential for future reform of zero hour contracts and wider employment law developments.
Glossary
| Term | Meaning |
|---|---|
| Zero hour contract | A working arrangement under which the employer is not obliged to provide a minimum number of working hours and the individual is not obliged to accept work when offered. Statutory employment rights apply once work is undertaken. |
| Zero hour contract holiday pay | The statutory pay a worker on a zero hour contract must receive when taking annual leave, calculated to reflect what they would normally earn if working. |
| Holiday entitlement | The amount of annual leave a worker is legally entitled to take. Under UK law, this is a minimum of 5.6 weeks’ paid leave per leave year, pro-rated where necessary. |
| Holiday pay | The pay a worker receives when taking statutory annual leave. For workers with variable pay, this is calculated using an average of earnings over a reference period. |
| Working Time Regulations 1998 | The primary legislation governing working hours, rest breaks and paid annual leave in the UK, applying to workers including those on zero hour contracts. |
| Irregular hours worker | A worker whose working hours in each pay period are wholly or mostly variable, relevant to the application of hours-based holiday accrual methods. |
| Part-year worker | A worker who is required to work for only part of the year and has periods during which they are not required to work and are not paid. |
| 12.07% accrual method | An hours-based method of calculating holiday entitlement, representing the proportion of statutory annual leave relative to working weeks in a year, permitted for qualifying workers from April 2024. |
| Week’s pay | A legal concept used to calculate holiday pay. For workers with variable pay, this is based on average remuneration over the previous 52 paid weeks, ignoring unpaid weeks. |
| Carry-over | The ability to transfer unused holiday entitlement into a subsequent leave year, permitted only in defined statutory circumstances. |
Useful Links
| Resource | Description |
|---|---|
Working Time Regulations 1998 | The primary legislation governing paid annual leave, holiday entitlement and holiday pay for workers in the UK, including those on zero hour contracts. |
Holiday entitlement – GOV.UK | Official government guidance on statutory holiday entitlement, holiday pay and employer responsibilities. |
Employment Rights Act 1996 | Core employment legislation defining employment relationships and statutory protections for workers and employees. |
Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 | Legislation introducing the April 2024 changes affecting holiday entitlement and holiday pay for irregular hours and part-year workers. |
Zero hour contracts – employer guidance | Practical guidance for employers on managing zero hour contracts lawfully, including rights, risks and best practice. |
Holiday pay and working hours reforms (April 2024) | Detailed analysis of the April 2024 holiday pay reforms and their impact on employers and irregular hours workers. |
