Casual Worker Holiday Pay: How to Calculate It

Posted on Monday, 24th Apr '23

Duane Jackson by Duane Jackson

Calculating holiday pay for casual workers can be a varied task, especially when weekly or monthly hours are not contracted. Compared to full-time employees, casual workers will have a flexible working schedule, with hours worked differentiating from week to week. So, how do you keep a track of their holiday pay?

Tracking Casual Worker Holidays

Before you can calculate a worker’s entitled holiday pay, you’ll need to keep a record of the number of days or hours worked. As an employer, you have multiple choices when it comes to deciding how to pay holiday for your casual staff. Immediate or accrued payments ensure employers are adhering to legislation with no grey areas, and employees can’t claim an employer has withheld pay. Whichever option you select, it will be more beneficial to adopt software that records holiday allowance and days off for ad-hoc employees.

As casual workers are not covered to work set shifts, their holiday pay is designed to cover them on days off that would otherwise be used as holiday leave. Essentially, they do not need to book annual leave in the same fashion as full-time employees. Casual workers have optimal flexibility within a business, declining or accepting shifts as and when required. When a casual worker completes a shift, this should be logged so holiday pay can be accurately calculated.

How to Calculate Holiday Pay for Casual Workers

Gone are the days of paper-based record keeping; software that calculates it all for you is a game-changer for any industry. As well as removing human error, or the possibility of any discrepancies over incorrect holiday pay or leave, payroll software ensures that all records are up to date and factually correct.

As a business, you have the following choices:

1. Allow Holiday to Accrue

It’s possible to facilitate a deal with casual workers that allows their accrued holiday to be paid out at a later date. Using this method can be beneficial for casual workers with inconsistent shift patterns. Through software, the person in charge of payroll will need to log hours worked and, instead of paying out a holiday allowance with every pay cheque, will build a bank of holiday pay instead.

Depending on your agreements with casual employees, the balance of accrued holiday pay can be paid out manually. For example, it can be delivered quarterly or annually, or on a different schedule altogether. This flexibility means employers can pay out holiday pay for casual workers as and when required , for example, if it is requested by the employee or in the last pay packet after their role has been terminated.

2. Offer Immediate Payment

As UK legislation prevents employers from withholding holiday pay from their employees, it could be a safer option to offer immediate payment. As and when a casual worker is scheduled to work and completes their shift, a calculation is made to determine the amount of holiday allowance. This adds an extra line on an individual’s payslip stating holiday pay is included. Under this system, there is no room for error and employees can clearly see any holiday that has already been awarded to them.

Payments in lieu also ensure greater security for employers. Each time an employee works and is paid, their payslip will reflect their statutory holiday allowance, meaning employers are covered regarding their holiday allowance legislation. There can also be no confusion when an employee chooses to leave or has their contract terminated. Removing grey areas offers employers a clear and transparent process with no room for interpretation.

3. Use Metrics to Calculate Statutory Pay

According to GOV.UK, statutory holiday entitlement is calculated at 5.6 weeks per year. If a casual worker works closer to full-time hours, this translates into 12.07% of their total hours worked. Through software, this percentage will automatically be calculated based on hours worked and wage requirements for the casual employee.

Similar to many full-time employees who work a 37.5-hour week, calculating holiday pay for casual workers is entirely dependent on hours worked. The difference is that both parties could receive a holiday allowance that varies. Typically, those working full-time should receive a minimum of 28 days of holiday allowance that can be booked as annual leave. For casual workers, the number of days accrued is entirely reflective of the hours worked.

4. Continue Calculating Holiday Manually

Sadly, this option leaves significant margin for error. From mislaid paperwork to incorrect hours logged, employees could be prevented from receiving their full entitlement. As it’s illegal for an employer to withhold holiday pay from any employee, it could lead to further trouble if working hours and holiday pay are incorrectly calculated.

To give employers extra support, GOV.UK includes a holiday entitlement calculator that offers a basic reflection on holiday accrued. Of course, this doesn’t cover individual circumstances that might affect an employee, such as sick leave and parental leave.

Even with your most eagle-eyed employees working on the payroll process, adopting payroll software could save departments time and effort. Manual calculations take time and may require checking before submitting them to accountants or payroll companies. Utilising payroll software can alleviate pressures within HR and payroll departments, whilst allowing your business to prioritise more critical projects.

FAQs About Casual Worker Holiday Pay

What is Holiday Pay?

Holiday pay or leave entitlement is a form of statutory leave offered to workers. Whether you employ full-time, part-time, casual workers, or contractors, each party is entitled to holiday pay.

When a worker takes paid holiday leave within their entitlement, they must be paid at the same rate as if they were completing a full day’s work. For casual workers, this will be calculated through the hours worked, translating into hours owed.

Are Workers Without Fixed Hours Entitled to Holiday Pay?

Casual workers and those on zero-hours contracts are entitled to holiday pay. In this instance, holiday pay can be calculated through several different means. It’s possible to work out an employee’s average pay across the previous 52 weeks in order to fairly judge holiday accrued. This allows employers and employees insight even when hours are irregular and follow no set pattern.

For those needing an immediate solution, holiday pay can be established after each shift a casual worker has completed. Employees will see any holiday pay included within their payslips, whilst employers ensure they adhere to government legislation. If required, employers can also schedule any accrued holiday to be paid at various points throughout the year.

Do Bank Staff Get Holiday Pay?

The term bank staff refers to those who work with greater flexibility and on zero-hours or casual contracts. If someone who is classed as bank staff within a business or organisation has completed work for an employer within the year, they will be entitled to holiday pay.

Bank staff are individuals who can be called upon by an employer to work when the need arises, which can typically include seasonal staff. Many industries benefit from bank staff, such as retail, care, and education. They often provide solutions for industries suffering from low numbers or staff sickness, ensuring businesses, healthcare, and education settings can operate safely.

Do Casual Workers Accrue Holiday Leave When Taking Sick Days?

Casual workers can accrue holiday pay whilst taking a sick day. Due to the nature of zero-hour and freelance contracts, a worker can request holiday pay to cover a sick day, but an employer is unable to enforce this.

As a rule, casual workers may also be applicable to receive statutory sick pay if they meet set criteria and are classed as an employee.

Don’t Be Caught Out by Manual Payroll Calculations for Casual Workers

Payroll offers transparency for both employees and employers regarding time worked, and holiday pay delivered. Manual calculations can cause irregularities and are prone to human error. Remove the risk with Staffology’s payroll software.

Request a demo today, or speak to one of the team.

Duane Jackson, April 24th, 2023

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