How does holiday pay for casual workers work in the UK?

Managing holiday pay for casual workers can be challenging when hours are irregular or unpredictable. Around 3.4% of UK workers, roughly 1.2 million people, are on zero-hours contracts as their main job, according to the Work Foundation's September 2025 report.

GOV.UK guidance confirms that almost all workers (excluding genuinely self‑employed people) are entitled to 5.6 weeks’ paid holiday a year, including those on irregular‑hours or part‑year contracts. ACAS highlights that under‑payment of holiday pay is a common compliance risk, especially where accruals or average‑earnings calculations are not adjusted for fluctuating hours.

In the UK, casual workers are still entitled to paid annual leave, and getting the calculations right is essential to stay compliant, avoid tribunal claims, and treat non‑standard‑hours staff fairly. This guide explains how holiday pay for casual workers works, how to calculate it, and what rules you need to follow in 2026.

What is holiday pay for casual workers?

Holiday pay for casual workers is the paid leave entitlement that workers accrue based on the hours they work, even if they do not have fixed schedules or guaranteed hours.

👉To note: Casual workers are legally classified as “workers” (not employees), but they still benefit from core rights such as paid annual leave under the Working Time Regulations 1998.

What does holiday pay for casual workers cover?

Holiday pay for casual workers generally includes:

• Statutory annual leave (up to 5.6 weeks per year), proportionally earned as the worker works.

• Accrual of leave each time they work, even on irregular or ad‑hoc shifts.

• Payment at a worker’s normal rate of pay, reflecting their average earnings if hours or pay vary.

Why is holiday pay important for irregular‑hours staff?

Holiday pay for casual workers ensures they receive core employment rights equivalent to regular staff, as confirmed by GOV.UK for 2026/27. Failing to pay enough holiday pay can lead to employment tribunal claims and unlawful deduction from wages.

Are casual workers entitled to holiday pay in the UK?

Yes, casual workers are entitled to holiday pay in the UK, regardless of how irregular their work is. Under the Working Time Regulations 1998, almost all workers, including those on irregular‑hours or part‑year contracts, are entitled to 5.6 weeks’ paid holiday a year in the 2026/27 tax year.

Which groups of casual workers accrue statutory holiday?

Under GOV.UK and ACAS guidance for 2026/27, the following groups are entitled to statutory holiday pay:

• Zero‑hour contract workers (now classified as irregular hours workers).

• Part‑year workers, such as seasonal staff.

• Agency workers, once they meet the 12‑week qualifying period.

Can employers rely on the 12.07% method for irregular workers?

For irregular-hours and part-year workers, holiday pay is typically calculated using average weekly earnings over the previous 52 paid weeks, excluding any weeks without pay and extending back up to 104 weeks if needed. The 12.07% method may still be used for tracking accrued holiday, but it does not always provide an accurate measure of statutory holiday pay.

This is the current GOV.UK recommended approach for 2026/27.

Are zero-hour contract workers entitled to holiday pay?

Yes, zero‑hour contract workers are entitled to statutory holiday pay in the UK, even if they have no guaranteed hours. Under the Employment Rights Act 2025, they are treated as irregular hours workers and must receive 5.6 weeks’ paid holiday proportionally.

How does the 12.07% rule apply to zero‑hour workers?

For zero‑hour workers with fluctuating hours, holiday pay should normally be based on average weekly earnings over the last 52 paid weeks. The 12.07% accrual method can be used to track holiday entitlement, but holiday pay itself should usually be based on average weekly earnings to ensure it reflects normal pay under UK employment rules.

What happens if a zero‑hour worker never takes leave?

Unused statutory holiday does not simply expire if employers do not encourage or allow it. ACAS notes that unused entitlement can carry over, creating a financial liability that must be paid when the worker takes leave or leaves the business.

Zero‑hour workers accrue holiday pay in the same way as other casual workers:

• Based on hours worked

• With no minimum hours required

• Paid at their average weekly earnings

How is holiday pay for casual workers calculated?

Holiday pay for casual workers is calculated either through holiday accrual or by using a 52-week average pay calculation, depending on the worker’s pattern of hours and how leave is taken. In all cases, workers must receive paid holiday based on their normal pay and statutory entitlement.

When should employers use the 12.07% method?

The 12.07% accrual method is commonly used for casual or irregular-hours workers to track how much paid holiday they build up over time. Under this approach, holiday entitlement accrues in proportion to the hours worked.

The percentage comes from the statutory entitlement of 5.6 weeks’ holiday across a working year of 46.4 weeks.

📌 Example: if a worker completes 100 hours of work, they accrue 12.07 hours of paid holiday.

When should the 52-week average be used instead?

Where pay or hours vary significantly, holiday pay is often based on the worker’s average earnings over the previous 52 paid weeks. This calculation can include regular overtime, commission, and other payments that form part of normal remuneration.

Weeks with no pay are excluded from the calculation, and earlier paid weeks can be used where necessary, up to a maximum 104-week reference period.

👉 To note: if the employment contract provides more than the statutory 5.6 weeks of leave, the accrual percentage may need to be adjusted to reflect the higher entitlement.

Holiday pay calculation example:

What are the rules for paying casual workers’ holiday pay?

Employers must follow several key rules when paying holiday pay to casual workers:

• Holiday pay should match what the worker would normally earn if they were working. This prevents underpayment, especially for workers with fluctuating income.

• Rolled-up holiday pay is permitted again for irregular hours workers following recent reforms (2024). However, it must be clearly stated in the contract and be separately itemised on payslips.

• Even if holiday is accrued or paid regularly, workers must still be able to take time off. Employers cannot replace statutory leave entirely with extra pay.

Many employers follow a payroll compliance checklist to prevent errors and avoid payroll law infringement.

Are there exceptions to casual workers’ holiday pay?

Exceptions are rare, as most casual staff legally qualify as "workers." The main exception is for genuinely self-employed individuals; however, this only applies if the person has total control over their schedule and provides their own equipment. If your company dictates their hours or integrated them into the team, HMRC may reclassify them as workers, making you liable for backdated holiday pay.

⚠️ Warning: Simply labelling someone a “freelancer” or “self‑employed contractor” does not remove your obligation to provide statutory holiday pay if, in practice, they work like a worker; for example, if you set their hours, control how they carry out tasks, and integrate them into your team. In these cases, HMRC and employment tribunals can reclassify them as workers , which may result in liability for backdated holiday pay and adjustments to previous payments. 

👉 To note: Simply labelling someone a "freelancer" doesn't exempt you from holiday pay. HMRC prioritises the actual working relationship over the job title to ensure worker rights are protected.

How can employers simplify holiday pay management?

Employers can simplify holiday pay for casual workers by standardising calculations and using digital tools.

Key steps include:

• Tracking hours worked accurately.

• Keeping detailed payroll records.

• Ensuring payslips clearly show holiday pay.

Using payroll software can help automate these processes and reduce administrative burden, particularly for companies with high staff turnover or seasonal demand.

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