Holiday Pay for Zero Hours Workers UK: A Complete Guide (2026)
Zero hours workers are entitled to paid holiday — the same as any other employee. But calculating that holiday pay correctly has historically been a source of confusion, disputes, and costly errors for UK employers. Get it wrong and you face tribunal claims, back payments, and HMRC scrutiny.
This guide covers everything UK employers need to know about holiday pay for zero hours workers in 2026, including the important changes introduced in January 2024 that simplified — and in some cases changed — the calculation method.
Are Zero Hours Workers Entitled to Holiday Pay?
Yes, absolutely. Zero hours workers are "workers" in employment law terms (not "employees," unless they meet that higher threshold), and all workers are entitled to statutory annual leave under the Working Time Regulations 1998.
The statutory minimum is 5.6 weeks per year (28 days for a full-time worker on a 5-day week, including bank holidays). For zero hours workers, this entitlement is pro-rated based on the hours they actually work. You cannot pay them less, offer "rolled-up" pay in lieu without agreement, or tell them they don't accrue leave because they're on a zero hours contract.
"Zero hours workers have the same right to paid annual leave as any other worker. There is no minimum hours threshold to qualify."
— GOV.UK Working Time Regulations guidance
How Is Holiday Pay Calculated for Zero Hours Workers?
This is where it gets technical — and where most errors occur. Holiday pay for workers with variable hours must reflect their average pay, not just their basic rate.
The 52-Week Reference Period (Since April 2020)
Since April 2020, UK employers must calculate average weekly pay for holiday pay purposes using a 52-week reference period. You look back at the 52 weeks in which the worker was paid, average their weekly pay, and use that figure as the holiday pay rate.
Key rules:
- Only include weeks in which the worker actually received pay
- Skip any weeks with no pay (illness, unpaid leave, no work offered) and go further back to find 52 paid weeks — up to a maximum of 104 weeks back
- Include all regular pay: basic pay, overtime, shift premiums, commission that is regularly paid
- Exclude one-off payments: advance payments, redundancy pay, discretionary bonuses
Example Calculation
Sarah works on a zero hours contract. Over the last 52 weeks she received pay in 40 of them, earning a total of £14,800. Her average weekly pay is £14,800 ÷ 40 = £370.
Sarah is entitled to 5.6 weeks' leave per year, pro-rated to her hours. If she typically works 20 hours per week, her leave entitlement is 5.6 × 20 = 112 hours. When she takes a week off, she should receive 20 × (£370 ÷ 20) = £370, or £18.50 per hour × 20 hours.
The 2024 Changes: Holiday Accrual for Irregular Hours Workers
From 1 January 2024, the government introduced a new method of accruing and calculating holiday leave for "irregular hours workers" and "part-year workers" — including many zero hours workers. These changes were part of the Retained EU Law (Revocation and Reform) Act 2023.
Option 1: 12.07% Accrual Method (Now Statutory for Irregular Hours Workers)
For leave years starting on or after 1 April 2024, irregular hours workers accrue leave at a rate of 12.07% of hours worked in each pay period. This effectively restores the old "rolled-up" calculation as the default for this group — but with important caveats.
The 12.07% comes from: 5.6 weeks ÷ (52 − 5.6) = 5.6 ÷ 46.4 = 12.07%
So if a zero hours worker works 30 hours in a fortnight, they accrue 30 × 12.07% = 3.62 hours of leave for that period.
Option 2: Rolled-Up Holiday Pay (Now Lawful for Irregular Hours Workers)
From 1 April 2024, rolled-up holiday pay — paying an extra 12.07% on top of normal pay instead of paying separately when leave is taken — is now lawful for irregular hours and part-year workers. This had previously been ruled unlawful by UK courts following an EU case.
If you use rolled-up pay, it must be:
- Clearly shown as a separate line on the payslip
- Calculated correctly (12.07% of the pay in that period)
- Agreed in the worker's contract
Workers who receive rolled-up pay can still take time off — they just don't receive additional pay when they do.
TimeTallyAutomatic Holiday Accrual for Zero Hours Workers
TimeTally tracks hours worked and calculates leave accrual automatically for irregular hours workers — including the 12.07% method.
Free for 14 days • No credit card required
Bank Holidays and Zero Hours Workers
Bank holidays are not automatically guaranteed days off for zero hours workers. Their entitlement depends on whether bank holidays are included in their 5.6-week allowance or are in addition to it — this is a contractual matter. See our full guide on bank holiday entitlement UK for details.
If a bank holiday falls on a day a zero hours worker would normally have worked, and you close the business, you must either:
- Count it against their leave entitlement and pay them holiday pay, or
- Pay them for the bank holiday as a normal working day (if your contract allows this)
Common Mistakes Employers Make
1. Not Paying Holiday Pay at All
Some employers believe zero hours workers aren't entitled to leave. They are. Failing to pay holiday pay is unlawful and can result in Employment Tribunal claims going back several years.
2. Using the Wrong Reference Period
Using only recent weeks or a short reference period will often understate average pay — especially if the worker has had slow periods recently. Always use the full 52-week method.
3. Excluding Overtime and Variable Pay
Regular overtime and shift premiums must be included in holiday pay calculations. This has been confirmed by multiple Employment Tribunal and EAT cases. Only genuinely irregular, one-off payments can be excluded.
4. Stopping Holiday Accrual During Periods of No Work
Zero hours workers accrue leave only when they are working (or on statutory leave). During gaps between assignments, they do not accrue leave — but you cannot claw back leave already accrued.
Paying Out Holiday on Termination
When a zero hours worker's assignment ends or you cease to use them, any accrued but untaken leave must be paid out as a payment in lieu. Use the same average pay calculation to determine the daily or hourly rate.
Keep records of hours worked and pay in each period for at least 6 years — HMRC and employment tribunals can request this as evidence.
TimeTallyBuilt for UK Businesses with Variable-Hours Workers
Track hours, manage leave, and stay compliant — whether your team is on fixed contracts or zero hours arrangements.
Free for 14 days • No credit card required
Summary: Key Rules for 2026
- Zero hours workers are entitled to 5.6 weeks' paid leave per year, pro-rated to actual hours
- Holiday pay is calculated on a 52-week average of actual pay received
- From April 2024, the 12.07% accrual method is now statutory for irregular hours workers
- Rolled-up holiday pay is now lawful for irregular hours workers if shown clearly on payslips
- Regular overtime and shift premiums must be included in the average
- Accrued leave must be paid out on termination
- Records must be kept for at least 6 years
Getting holiday pay right for zero hours workers protects you from tribunal claims and builds trust with your workforce. If you rely on variable-hours staff — in hospitality, care, retail, or elsewhere — it's worth reviewing your payroll calculations today.