Zero hours contract holiday pay: how to work it out with the 12.07% rule

The short answer

A worker on a zero hours contract gets paid holiday like any other worker: 5.6 weeks a year. What changed in 2024 is how you work it out. For leave years starting on or after 1 April 2024, someone whose hours are wholly or mostly variable is an "irregular hours worker" and accrues holiday at 12.07% of the hours worked in each pay period. You can either let that holiday build up and pay it when it is taken, or pay it as it is earned ("rolled-up holiday pay") at 12.07% of the pay for the period, shown as a separate line on the payslip.

This guide walks through both methods with the numbers, what has to appear on the payslip, and the mistakes that end up at a tribunal. It is general information, not legal advice.

Who this applies to

The 12.07% method applies to two groups, defined in the Working Time Regulations since 1 January 2024:

• Irregular hours workers: the contract says the paid hours in each pay period are wholly or mostly variable. A zero hours contract is the textbook case. So is a casual or bank contract with no fixed hours.
• Part-year workers: the contract only requires work for part of the year, with at least one week in the year when they are not required to work and are not paid. Seasonal staff, some term-time-only roles.

Someone on fixed hours, even few of them, is neither. A person contracted for 8 hours every Saturday is a part-time worker with regular hours, and holiday is worked out the ordinary way: 5.6 weeks, pro rata. The holiday entitlement calculator covers both cases.

If the leave year started before 1 April 2024, the old rules still applied to that year. Almost every business is now in a leave year that started after that date.

Method 1: accrue 12.07% of hours worked

Each pay period, multiply the hours actually worked by 12.07%. The result is holiday, in hours, added to the worker's balance.

Where does 12.07% come from? 5.6 weeks of holiday out of 46.4 weeks of work (52 minus 5.6). 5.6 divided by 46.4 is 12.07%.

Worked example. Priya is on a zero hours contract at a cafe, paid monthly. In June she works 86 hours.

86 × 12.07% = 10.38 hours

Fractions round to the nearest hour: 30 minutes or more rounds up, less than 30 minutes rounds down. 10.38 hours becomes 10 hours of holiday accrued for June.

Over a year in which she works 1,000 hours, she accrues about 121 hours of paid holiday. That is the same 12.07% of her working time that a full-timer's 28 days represent out of theirs.

When she takes a day off, you deduct the hours she would have worked that day from the balance, and pay her for them at her holiday rate (next section).

What rate to pay: the 52-week average

Holiday pay for a worker with variable hours is based on average pay over the last 52 weeks in which they were paid for work. Weeks with no pay are skipped, and you can look back up to 104 weeks to find 52 paid weeks. If the worker has less than 52 paid weeks of history, use what there is.

"Pay" here means normal remuneration, which includes overtime that has been paid regularly over the previous 52 weeks, commission tied to the work, and payments for length of service or qualifications. Basic rate only is not enough if the person regularly earns more than that.

Method 2: rolled-up holiday pay

Since the 2024 reform, employers may pay irregular hours and part-year workers their holiday pay as they earn it, instead of when they take leave. The rules:

1. The uplift is 12.07% of the worker's total pay for the pay period, including overtime and enhanced rates, not just basic hours.
2. It is paid at the same time as the pay for the work.
3. It must be shown as a separate line on the payslip. "It's included in your hourly rate" with nothing itemised does not meet the rule.
4. The worker still accrues the leave and can take it; the time off is unpaid at that point because the pay was already received.

Worked example. Same June: 86 hours at £12.71 (the National Living Wage for 21 and over from April 2026) = £1,093.06. Rolled-up holiday pay: £1,093.06 × 12.07% = £131.93, shown on the payslip as holiday pay. If she also did 6 hours at an enhanced Sunday rate, the 12.07% applies to that pay too.

Rolled-up pay suits businesses where staff work a few shifts a month and rarely book a week off. It removes the year-end scramble over unpaid balances. It is not allowed for workers with regular hours.

Which method to pick

• Staff who work most weeks and take blocks of leave: accrue and pay when taken. They get paid while off, which is what holiday is for.
• Staff who work occasionally: rolled-up, itemised. Fewer disputes about balances nobody tracked.
• Whichever you choose, write it in the contract or the written statement of particulars, and apply it to everyone in the same category.

The mistakes that cost money

No holiday pay at all. Still common with "casual" staff. Zero hours workers are workers; the entitlement is statutory. Back pay claims can cover a long period.

12.07% of basic pay only. If people regularly do paid overtime or get a Sunday uplift, the holiday pay base has to include it. Same for the 52-week average.

Rolled-up pay that is not on the payslip. The separate line is a condition, not a courtesy.

No record of hours. Both methods start from hours worked. If the rota and the clock-in records do not agree, the holiday figure is wrong before it is calculated. A rota that lists the hours, and a record of the hours actually worked, are the raw material.

Using the old "5.6 weeks of what?" logic. Before the reform, a Supreme Court case (Harpur Trust v Brazel, 2022) meant part-year workers on permanent contracts were entitled to 5.6 weeks regardless of hours worked. The 12.07% rule was written to replace that for leave years from April 2024.

What changes next: the Employment Rights Act 2025

The Employment Rights Act 2025 adds three rights for zero hours and low hours workers: an offer of guaranteed hours reflecting the hours actually worked over a reference period, reasonable notice of shifts, and payment when a shift is cancelled, moved or cut short at short notice. The government has said these take effect in 2027, with the details set out in regulations that were still under consultation in mid-2026 (the full picture for employers is in zero hours contracts: the rules for employers). Holiday pay is not changed by the Act, but the record of hours it relies on becomes even more important: the guaranteed hours offer is calculated from it.

Putting it on the rota

Holiday for variable-hours staff is a running total: hours in, holiday out. It works when three things are true: every shift has its hours recorded, the balance is visible to the worker, and the payslip shows the holiday line. The free rota templates add up the hours per person per week; the online rota planner keeps the hours, the leave requests and the balance next to each name, and the team sees their own figures on their phone. What an hour of staff costs once holiday is added: the UK employee cost calculator. The limits those hours still have to respect: the Working Time Regulations and your rota.

*Sources: gov.uk, "Holiday pay and entitlement reforms from 1 January 2024"; gov.uk, "Contract types and employer responsibilities: zero-hours contracts"; gov.uk, National Minimum Wage rates from April 2026; Acas, Employment Rights Act 2025. Rates and rules current as of September 2026.*