Zero hours contract holiday pay: where the 12.07% comes from, and the line on the payslip that makes it lawful

The number used to be a convention. Now it is in the Regulations

For years 12.07% was a rule of thumb — 5.6 weeks of statutory leave divided by the 46.4 working weeks that remain — and rolled-up holiday pay sat in a grey area that case law had made uncomfortable. Both things changed when regulations 15B to 15F were inserted into the Working Time Regulations 1998 by the Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023, with effect for leave years beginning on or after 1 April 2024.

What follows is only about those two categories of worker. For someone on fixed hours, the old arithmetic of 5.6 weeks still applies and none of regulation 15B does. Where the engagement is not employment at all, the holiday question does not arise and the money is settled in the contract: 1099 contractor agreement template.

Who counts as an irregular hours worker

Regulation 15F defines both categories, and the definitions are narrower than the labels suggest. A worker is an irregular hours worker, in relation to a leave year, if the number of paid hours they will work in each pay period during the term of their contract in that year is, under the terms of their contract, wholly or mostly variable. A worker is a part-year worker if, under the terms of their contract, they are required to work only part of that year and there are periods within that year, during the term of the contract, of at least a week which they are not required to work and for which they are not paid.

Two refinements matter in practice. Subsection (2) says that where a worker has more than one contract with the same employer, whether the hours are wholly or mostly variable is judged when the terms of their contracts with that employer are looked at in the round — so splitting someone across two contracts does not settle the question. And subsection (3) says that in deciding whether someone is a part-year worker, any period of sick leave or statutory leave taken in that leave year is to be ignored. A term-time worker and a bank worker usually qualify; someone on a steady four-shift pattern with an occasional extra shift usually does not.

Regulation 15B: the accrual, with its rounding rule

Regulation 15B(2) sets the entitlement as a running balance: the amount of annual leave at any time during a leave year is what has accrued in that year, plus anything carried forward into it, less anything taken during it. Subsection (3) says how it accrues: during any period of sick leave or statutory leave in accordance with regulation 15C, and otherwise on the last day of each pay period at the rate of 12.07% of the number of hours that they have worked during that pay period.

Then three details that decide whether a payroll run is right. Subsection (4): a worker cannot, in any leave year, accrue more than 28 days of annual leave under the regulation. Subsection (5): where the amount accrued includes a fraction of an hour, the fraction is to be treated as zero if it is less than 30 minutes and one hour if it is 30 minutes or more. And subsection (6): the leave may be taken in instalments, but it may not be replaced by a payment in lieu except where the worker’s employment is terminated.

Subsection (7) sets when the leave year begins: on the date provided for in a relevant agreement, or, where no relevant agreement applies, on the date the worker’s employment begins and each subsequent anniversary of it. That is worth settling in the contract itself rather than discovering a worker whose leave year starts on a different day from everybody else’s, and it belongs in the same document as the hours: a mutual NDA and an employee confidentiality agreement travel separately, but the leave year does not. The contract clause that most zero-hours templates still get wrong is a different one, and it is in zero hours contract template.

Regulation 16A: rolled-up pay is allowed, with a condition

Regulation 16A applies to pay due under regulation 16(1) in respect of leave to which the worker is entitled under 15B. Subsection (2): such holiday pay may be paid by way of a 12.07% uplift to the worker’s remuneration for work done. Subsection (3): it must be paid at the same time as that remuneration. Subsection (9) closes an obvious gap: the reference to remuneration is a reference to all types of payments that are to be included when determining the amount of a week’s pay for the purposes of regulation 16, so the uplift is not calculated on basic pay alone.

And subsection (7), which is where employers come unstuck: where an employer pays holiday pay in that way, any itemised pay statement provided by the employer to the worker must indicate the amount of holiday pay that has been paid for the period to which the statement relates. Subsection (8) gives the reward for doing it properly: an employer who pays in accordance with (2) or (5) is discharged from their liability to make payments under regulation 16 in respect of that leave. The discharge and the payslip line are two halves of the same arrangement.

What happens when the worker goes off sick

This is the corner the 12.07% uplift cannot reach on its own, because there is no remuneration to uplift. Regulation 16A(4) and (5) handle it: a worker on sick leave or statutory leave who was being paid rolled-up holiday pay before going off must be paid holiday pay by way of a payment each pay period during that leave, equal to the average amount of holiday pay they were paid for each pay period during the relevant period. Subsection (6) defines the relevant period as the 52 weeks ending with the day before the leave started, or the shorter period if they had been receiving rolled-up pay for less than 52 complete weeks.

What to fix, in order

1. 1Decide, per worker, whether they are an irregular hours worker or a part-year worker, on the terms of the contract rather than on how the rota happened to look. Regulation 15F is a contractual test.
2. 2Fix the leave year in the contract, so regulation 15B(7) does not hand you a different start date for every hire.
3. 3Choose one method and say so: accrue and pay when leave is taken, or roll up at 12.07%. Doing half of each is how the same hours get paid twice or not at all.
4. 4If you roll up, put the holiday pay line on the payslip. Regulation 16A(7) requires the itemised pay statement to indicate the amount for the period, and 16A(8) only discharges the liability for payments made in accordance with the regulation.
5. 5Build the rounding rule into the payroll, not into a note. Under 30 minutes is zero, 30 minutes or more is an hour, per 15B(5).
6. 6Have a plan for sick leave, because the uplift has nothing to uplift: regulation 16A(4) to (6) requires an average based on the 52 weeks before the leave began.

For the documents around all this: the letter of offer of employment is where the leave year and the pay arrangement belong from day one, an employment letter confirms terms that changed, and a contract amendment is the right instrument when hours or method change mid-term. Where the engagement is not employment at all, none of this applies and the money has to be settled in the contract instead: independent contractor payment terms, a freelance contract or an independent contractor agreement. For agency arrangements, a staffing agency contract.

When the relationship ends, the leave accrued but untaken is the one thing regulation 15B(6) does allow to be paid in lieu, and the notice side of the letter is set by statute too: contract termination letter for an employee, with a termination letter for the structure, and a settlement agreement where the exit is negotiated — whose six statutory conditions are in settlement agreement template.

Proving what the worker was told

Holiday pay claims are arithmetic disputes that run over years, and they turn on what the worker was told and when: which method applied, when the leave year started, what the payslip showed. The payroll record is half of that. The other half is the document the worker actually received and acknowledged.

SignSolú is an e-signature platform that works over WhatsApp, and that is the narrow job it does here. Each document you send keeps an audit receipt with the time, the IP, the device and a SHA-256 hash of the file, and the recipient acknowledges it by signing rather than by replying — so the letter explaining the leave year and the 12.07% arrangement becomes a dated, hashed, acknowledged document rather than an email nobody kept. Anyone can check it later at /verificar without an account, and signers need no account and pay nothing. The interface is in Spanish; what the sender chooses per signer is the language, so a signer set to English gets the email, the WhatsApp message and the signing page in English. Whether that signature binds, and where, is in is an electronic signature legally binding. The free plan is 10 documents with no expiry and no card: start here.