How to calculate holiday pay for casual workers

There’s a million ways to trip up when you’re calculating holiday pay entitlement, especially if you don’t like maths.

It’s simple enough to figure out holiday allowance for people who work full-time hours every week (remember, they get at least 28 days of paid time off a year), but it gets more confusing when things aren’t so consistent.

The biggest challenge is calculating holiday pay for casual workers – people who don’t work the same number of hours every week. They obviously still earn  paid time off, but how do you calculate how much?

With around 5 million casual workers in the UK alone, this is an important thing to understand if you’re working in HR or management. Luckily, we’re here to explain the whole situation for you.

What is a casual worker?

Casual workers are employed without any concrete agreement on when they’ll work or how long they’ll be needed. Basically, they’re given no guaranteed working hours.

Employers of casual workers are under no obligation to offer them regular hours, and casual workers themselves don’t even have to accept the work when it’s offered. But they still have rights as workers. That includes their right to the national minimum wage, paid time off, and all the other things that keep employment fair.

You’ll have heard of zero-hours contracts before – they’re a perfect example of a casual employee/employer relationship. They operate under a system where working hours are doled out as they’re needed, usually on short notice.

This system works well for businesses like fruit picking farms or sports stadiums, it means they can flex their workforce according to the seasonal workload.

Casual worker rights

If you’re classified as a worker, no matter how few hours you work or how irregularly they’re spaced, you have employment rights. The law says all workers should get:

·         The national minimum wage

·         Paid annual leave

·         The statutory minimum length of reset breaks

·         Right of refusal to work more than 48 hours per week on average

·         Protection against deductions from wages and unlawful discrimination

·         Protection for whistleblowing

All employees are entitled to the equivalent of 5.6 weeks’ statutory holiday pay through the Working Time Regulations 1998. For full time employees working five days a week, this works out at 28 days a year. For everyone else, including casual workers, it’s calculated on a pro rata basis.

The amount of holiday pay that casual workers will get is based on the number of hours that they work on average. The stretch of time you should look over to figure out their average number of hours is called the holiday reference period and is currently 52 weeks (It used to be the last 12 weeks but was increased in April 2020).

If you’re trying to calculate the amount of accrued paid holiday for someone who’s been employed for less than 52 weeks, the reference period is shortened to the length of time they’ve been employed for. You should also exclude any weeks when they weren’t paid at all because they didn’t work.

Calculating casual workers’ holiday entitlement

Assuming they’ve worked for the last 52 weeks, the calculation to figure out their holiday pay entitlement involves adding each individual week’s worth of pay together before dividing by 52 (a mean average calculation). The number you get is their minimum rate of holiday pay for a week off.

Weekly holiday pay = sum of last 52 weeks’ pay / 52

Another calculation that’s sometimes used is called the 12.07% method. It’s based on the idea that the statutory holiday entitlement for full-time workers is 5.6 weeks, or 12.07% of the 52 weeks that are in a year. So, figure out 12.07% of the total number of hours that a casual worker has put in in the year so far and you’ll have their current number of accrued paid holiday hours.

Hours of holiday accrued = (number of hours worked in the year so far / 100) * 12.07

Finally, and most simply, you could use a holiday entitlement calculator which will do the hard work for you.