Zero Hour Contracts and Holiday Pay - ** RESOLVED **

[joemaries]

Hi folks I could do with some stone clad advice. I am currently a care worker on a zero hour contract. My average weekly wage is around £415 (taken over 12 weeks). I have just received 5 days holiday equivalent to £350. My feeling is that this is wrong and I should have a weeks wage for claiming 5 days holiday pay. It is only a small firm and the company accountant takes our our average wage for the week and divides by 7 to get a daily rate and then pays this accordingly to how many days you are claiming for.

 

My annual wage is usually around £21500 so as a guide 12.07% is £2595 holiday pay I should expect over the course of the year for 28 days. This works out at a daily rate of £92.68 for every day claimed. If this figure were to be obtained via a 12 week period it would work out the same.

 

At the rate they are paying me I will end up with £1960 over the course of the year. Please help as I maintain I am being underpaid but the accountant insists he is correct. Who is correct?

[Sidewinder]

For a zero hours contract the holiday should be aggregated at 12.07% of every hour's pay earned - that isn't legislation, just the easiest way to work it, so that every employee has a running 'bank' of hours available to book as holiday.Nevertheless - if a 12 week reference period is used, then you should get an entitlement based on that, however there are a couple of complications to that. Your 12 week reference period - how many hours a week have you worked on average for your £415? Does this include hours worked above 'Full Time' hours? The employer may be calculating your holiday based on 'Full Time' entitlement - if you work above what is considered full time, then those hours may not be used to calculate your entitlement.

[johnjordan]

I had a similar problem last year and the advice I was given was that you are entitled to 12.07% of your earnings for the last 12 weeks in which you were paid wages. These do not have to be consecutive weeks, just weeks in which you actually earned anything. I was paid holiday on this basis by a very large company.

[joemaries]

Hi thanks for both your replies. To earn my £415 a week my wages are a mix of hourly paid work and paid sleep shifts where we are paid to sleep at a service users house. As a rule of thumb I have been doing approximately 55 hours and 2 sleeps a week.

 

The accountant is taking our last 13 weeks wages and dividing by 91 (the amount of days during period to get a daily rate and paying to how much we want. i.e. I had a week off and was asked if I how many days holiday pay I wanted. So if I wanted 7 days holiday pay I will have received £415. I still mantain it is wrong and want to prove it before going in guns blazing.

 

There are no 'full time hours' by entitlement so I can discount this as a method used. Our holiday pay is directly related to how much we earn. I presume Sidewinder you mean that as full time staff they can assume we work 40 hours a week so we will earn that as holiday pay?

 

A few months ago they put a vote to all staff to see if we wanted holiday pay as we earnt our normal. i.e. I earn £415 a week so my pay for that week will have been 415 + 12.07% = 465.09 and we would have been responsible for putting our own holiday pay aside. Nearly all staff voted against this but I can only assume therefore they waanted to work off the 12.07% rule.

 

So off the back of that info am I any closer to an answer? Thanks again for any help.

[Sidewinder]

I think that you need to get something in writing. Try asking the employer for a copy of your contract regarding holiday and their definition of holiday entitlement. The law is clear in that a week's pay should be your wages averaged over 12 weeks (where wages are irregular) and I cannot see how their calculations stack up (unless they are using the 28 day 'cap' on statutory holiday in some way that I cannot get my head around).

 

Trying to get staff to accept a 12.07% premium and do away with holiday constitutes rolled up holiday pay, which has been deemed unlawful - good job that didn't go through!

[Emmzzi]

you are entitled to 5.6 weeks holiday pay.

 

If your "week" is 7 days and you therefore get 39.2 days allowance (instead of the 28 a 5 day week holiday person gets) the accountant is correct.

[wobbly]

Week 7days?,working time directive says at least 1 day off a week or the equivalent of.

[Emmzzi]

Wobbly in this case we need to know how many days leave the person gets. Different calculations for wtd etc.

[citizenB]

There is to be an investigation into these "zero" hour contracts.

 

 

Stuart Roden, South West organiser for Unison union, said: "Zero hours are effectively slave labour and the worst kind of exploitation for those forced into this kind of employment as they, demand staff to be totally subservient and to be available 24-7 but without any guarantee of income.

 

"It means that employees cannot obtain normal credit arrangements or mortgages and property rental become problematic as they have no proof of regular income.

 

 

Read more: http://www.thisiscornwall.co.uk/1-700-council-workers-zero-hours-contracts/story-19832156-detail/story.html#ixzz2gCRZv8an

 

[san_d]

For a zero hours contract the holiday should be aggregated at 12.07% of every hour's pay earned -

 

I am not sure this applies to zero hour contracts. I've seen threads in other forums where workers on ZHC were paid peanuts or no holiday pay at all. I would like to see a link to a resource to be 100% sure.

[Sidewinder]

National Minimum Wage and Paid Holiday apply to all workers' contracts - even zero hours ones.

 

http://www.acas.org.uk/index.aspx?articleid=4468

 

http://www.acas.org.uk/media/pdf/7/o/Holidays-and-holiday-pay.pdf

 

http://www.adviceguide.org.uk/wales/work_w/work_rights_at_work_e/contracts_of_employment.htm#contracts_without_specific_working_hours

[joemaries]

Again thanks all for your input. Emmzzi in response to how many holiday days we receive. We get the standard 28 days holiday entitlement if holiday pay was paid in accordance to how you have said I would have no argument unfortunately we get no more entitlement to holiday days which as I understand they are entitled to do whether you work more than 5,6 or 7 days a week. Just would like people to know I am in discussions with my director about this and she is sympathetic to what I am saying but ultimately she has to listen to what the accountant is telling her. I am still 95% certain that the accountant is wrong.

[Emmzzi]

the accountant sounds wrong to me too!

[san_d]

National Minimum Wage and Paid Holiday apply to all workers' contracts - even zero hours ones.

 

http://www.acas.org.uk/index.aspx?articleid=4468

 

http://www.acas.org.uk/media/pdf/7/o/Holidays-and-holiday-pay.pdf

The second link has no mention of zero hour contract. The first one only vaguely mentions holiday pay but doesn't quantify it in any way. It is widely recognised that employers exploit zero-hours contracts to dodge holiday and sick pay.

[Sidewinder]

Employers might exploit the ignorance of their workers (or in many cases may be ignorant themselves), but the fact remains that it is unlawful to not give paid holiday. The mutuality of obligation or otherwise is usually not sufficient to change that.

[steampowered]

san_d, the legal basis for this is the Working Time Regulations: http://www.legislation.gov.uk/uksi/1998/1833/contents/made. The right to paid annual leave is at Regulation 13. The WTD sets out how this should be calculated in great detail where an employee does not have regular working hours. The exceptions are set out in Part III and zero-hour contracts are not one of them. Similarly zero-hour workers are still entitled to statutory sick pay.

 

My understanding is that most zero-hour employers provide a top-up to the hourly rate to deal with the right to paid annual leave. No doubt there are employers who break the law but I would think that most large employers are basically compliant.

[wobbly]

Steampowered,rolled up holiday pay is not allowed!

[wobbly]

From GOV website

Rolled-up holiday pay

 

Holiday pay should be paid for the time when annual leave is taken. An employer cannot include an amount for holiday pay in the hourly rate (known as ‘rolled-up holiday pay’). If a current contract still includes rolled-up pay, it needs to be re-negotiated.

[mariefab]

The EAT disagrees with the accountant.

 

http://www.bailii.org/uk/cases/UKEAT/2002/940_01_1403.html

[Sidewinder]

Steampowered,rolled up holiday pay is not allowed!

 

It is (sort of), but the contract needs to be VERY specific and the payslip equally detailed to clearly specify which proportion of the rate of pay is apportioned to the holiday aspect. The holiday pay portion of the pay must also be clearly in addition to the standard rate of pay and should not be used to reduce it.

 

In general terms rolled up holiday pay is technically unlawful, however where a contract is clear and specific, and the worker can be under no illusion that an additional rate of pay is made to account for holiday - at the correct percentage equating to the 5.6 weeks entitlement under the WTD - then an employer can still get away with this practice.

 

This is because although a worker may have a technical right to claim that the employer has failed to pay holiday pay in accordance with the WTD, an ET can only award an amount equivalent to the holiday pay due - so if the employer can demonstrate clear evidence that the correct amount of holiday pay has been paid to the worker, even though it is 'rolled up' then it is a technical breach only, and no additional award can be made.

 

Definitely not good practice, strictly speaking unlawful, but it can still be used providing it is done carefully and with the employee's understanding and agreement. Case law continues to throw up as many contradictions as it does points which clarify the issue!

[joemaries]

Hi thanks to all involved, it would seem according to the case referred to in mariefab's post that this is what is happening to me. I have the contract regarding holiday pay and is as follows

 

Holiday Entitlement

During the holiday year 1st January 2010 and beyond, paid leave equivalent to 5.6 working weeks ( working days) during the complete year

 

You will accrue your holidays concurrently during the year and your entitlement for part years of service will be calculated as 1/12th of the annual entitlement for each completed month of service during the current holiday year.

 

Holiday Pay

If you do not work a basic week of fixed or regular hours and/or days of work, calculation of a 'week's holiday pay' will be based on an average of your earnings during the twelve weeks actually worked in the period immediately leading up to the commencement date of your holiday.

 

I have also spoken to my director again today regarding this and she is urging me to sit down with the accountant as she says he is adamant he is correct. She explained to me that he is putting aside 12.07% in a pot and using that in accordance to pay us. We can be paid non accrued holiday pay if it is likely we are to earn enough to cover it.

 

On the basis of that my original statement surely still stands as I will have "built a pot" of approximately £2500 by the end of the financial year but have been paid approximately just under £2000.

 

Can I use anything concrete with the accountant other than the case highlighted above. Also if the accountant refuses to budge what are my options then? Thanks for all help it has been invaluable.

 

Joe

[steampowered]

If we use annual wage of £21500 my calculation is as follows:

weekly rate = 21500 / 52 = £413.46

holiday pay entitlement = 413.46 * 5.6 = £2315.38

 

This seems to be what is specified in your contract which is consistent with the Working Time Regulations. Regardless of the legal problems with rolled-up holiday pay this does not seem to be what is in your contract.

 

Perhaps the 12.07% thing is an internal company arrangement for managing cash flow rather than something you are contractually entitled to?

[joemaries]

sorry didn't read post properly

Edited October 2, 2013 by joemaries

[mariefab]

You can use your contract clause titled 'Holiday Pay'.

Any accountant should know how to calculate an average, it's junior school maths.

In case he doesn't; explain that all he needs to do is add together the last 12 weeks wages then divide that total by 12.

[joemaries]

Steampowered I'm confused as to how you reached your figures? 415 x 52 = 21580

???