Zero-Hours Contracts: Calculating Tax & Holiday Entitlement

Gary Green
Gary Green
June 18, 2021

The use of zero-hour contracts is used in many sectors including the food service, retail, healthcare and leisure sectors.

For employers, zero-hour contracts offer many advantages such as that the employer does not have to guarantee any hours of work and can offer workers changeable working hours at short notice. The workers may or may not be required to accept any work that is offered depending on the terms of the contract.

On the other side, for many employees there is great insecurity with these contracts, and they are often at the beck and call of their employers. The employees do not have any certainty on the minimum number of hours they will be able to work each week. Apart from not knowing how much they are going to earn on a week-by-week basis, some employees on zero-hours contracts also find it difficult to obtain financing due to not having a guaranteed income.

The flexibility of these arrangements does suit some workers. All zero-hours workers are entitled to statutory annual leave and the National Minimum Wage in the same way as regular workers.

The issue of these contracts has been heavily politicised for some time and the Government has been under pressure to act. There have even been calls for the UK to follow countries such as New Zealand which overwhelmingly voted to ban zero-hours contracts back in 2016. These issues have caused a rethink on the use of zero-hours contracts and some employers no longer offer this type of employment.

What Rights Do Employees Have?

By law, someone working under a zero-hours contract, has the right to:

  • National Minimum Wage and National Living Wage;
  • Paid holiday;
  • Pay for work-related travel;
  • Pay for being on call.

Workers should also be paid by PAYE and should not need to register for Self Assessment to declare their income from zero-hours contracts.

Employers cannot do anything to stop a zero-hours worker from getting work elsewhere. The law says they can ignore a clause in their contract if it bans them from:

  • Looking for work; or
  • Accepting work from another employer.

Calculating Holiday Entitlement

Almost all full-time workers in the UK are legally entitled to 5.6 weeks' (or 28 days) paid holiday per year. This is known as their statutory leave entitlement or annual leave. Legally, employers can include bank holidays in this total although not all employers do this. Employers are also free to provide additional non statutory holiday entitlement.

An employee’s actual statutory entitlement depends on how many hours / days they work per week. Part-time workers are entitled to a pro-rata entitlement. For example, 5.6 days holiday per year if they work one day a week.

This includes workers with irregular hours or zero-hours contracts. For casual workers with no normal hours, including workers on a zero-hours contract, the holiday pay they receive will be their average pay over the previous 52 weeks worked. As these workers do not work set hours, holiday pay would usually be calculated based on hours (rather than days) worked.

Any employee that has a problem with their holiday pay should try and resolve the issue with their employer. If this does not work, there are a number of ways to resolve the dispute including contacting ACAS or taking their employer to an employment tribunal.

The 'furlough' scheme is currently in place until 30 September 2021. Workers on any type of a contract including zero-hours are eligible to use the scheme (once they meet the other scheme requirements).

If you have any questions about the issues raised in this article, we at Key Business Consultants can help. Get in touch with us today or call us directly on 02037 282 848.

Interested in our services?
Fill in your details and a member of our experienced team will be in touch shortly to discuss your needs.
We adhere to strict GDPR rules and do not reveal or sell your data to any third-parties. For more, please read our Privacy Policy.
Latest Insights
October 13, 2021
What is the Restart Grant and How Do I Apply?

The COVID-19 global pandemic had a detrimental effect on many businesses, but there were some sectors...

September 27, 2021
Choosing The Correct VAT Scheme For Your Business

Choosing the right VAT scheme is an important step for small business owners and can have a considerable...

September 21, 2021
How to Claim EIS Income Tax Relief in 2021

If you need to know how to claim EIS income tax relief and enjoy what is...

September 2, 2021
Recovery Loan Scheme - What Is It and How Do I Apply?

As businesses seek to re-open and recover from the global pandemic, there are various forms of...

August 16, 2021
The Super-Deduction Scheme - How Does It Work?

You may have heard the term 'super-deduction' recently and wondered if you could be affected by...

August 12, 2021
The Tax Benefits of Non-Domiciled Status for UK Residents

Having a Non-Domiciled Status if you reside in the United Kingdom can have great benefits for...

July 9, 2021
Stamp Duty Land Tax (SDLT) Surcharge for Non-UK Residents

Stamp Duty Land Tax (SDLT) rates have changed again for non-residents buying a home in England...

July 7, 2021
How Is Cryptocurrency Taxed & Do I Need to Fill A Self-Assessment?

Cryptocurrency may live online with no government control or borders, but if you are in the...

July 5, 2021
Venture Capital Schemes: Tax Relief Guide For Investors

When it comes to finding out what tax relief is available for investors using a venture...

View Our latest insights »
Get the latest UK tax & business news and guidance delivered straight to your inbox
We care about the protection of your data. No spam. Unsubscribe anytime.
Copyright © 2021 Key Business Consultants LLP. Reg: E&W OC389322
linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram