If They Don’t Have A Written Contract, What Holiday Pay Do I Have To Pay?
If you’ve got workers who don’t have a written employment contract, there’s a few questions you probably have.
It all comes back to what their rights are when it comes to employment law.
But when it comes to holidays, what’s the score?
First thing’s first, any worker you hire has rights under employment law. And you as the employer also have responsibilities when it comes to what you’re legally required to pay in holiday pay.
Because they’re working for you without a written contract, there’s no official document specifying certain terms of employment. That means the assumption is that they’ll be entitled to the legal minimum for holiday pay and other requirements.
How Do I Know If They’re Entitled To Holiday Pay?
All workers are entitled to holiday pay. That includes employees, agency workers, casual workers, apprentices and zero-hours workers.
In fact, even if someone is classed as self-employed, they might still be a worker. If they do the work themselves and there’s nobody else to do it (no right of substitution), they’re a worker, and if they aren’t doing the work as part of their own business, they’re definitely a worker.
And remember that holiday means “paid time off” not just time off. Part time workers are not automatically “on holiday” when they are not working. Part time staff have a right to the paid holiday, pro rata their actual worked hours. Not just their contracted hours.
All workers are entitled to 5.6 weeks’ holiday every year.
If they work a standard 5-day week, this means they get 5.6 weeks or 28 days of paid holiday each year. It’s often called annual leave or statutory leave entitlement, but it all means the same thing.
If they work 40 hours a week (i.e. full time), they can’t earn more holiday by working more hours. Only if they work less than full time do they earn holiday for every hour worked.
Do I have to pay the bank holidays?
Bank or public holidays do not have to be given as paid leave.
Although bank holidays are not a legal requirement, many employers include them as part of the paid holiday entitlement. So, as the UK usually has 8 bank holidays per year, this means workers can get 20 days of holiday and holiday pay plus bank holidays.
What if I need staff to work on bank holidays?
You can just give your staff 28 days holiday, with no entitlement to paid bank holidays off. This is the best way to go if you need cover 7 days a week and have your staff working shifts, as is usual in hospitality and leisure. If they want a bank holiday off, and they are rota’d to work, they have to use some of their holiday entitlement to take the time off – if you agree of course!
What if they don’t work 5 days a week?
If you’ve got a worker who works less than 5 days per week, their holiday entitlement is calculated on a pro-rata basis. So, if they work 3 days per week, they’d get 3/5 of 28 days, which is 16.8 days of paid holiday a year.
This calculation works if they have set or regular hours every week.
What if they work irregular hours?
People who work irregular hours are also entitled to paid holiday, no matter what contract they are on. Every hour they work counts towards their holiday entitlement, up to the full time working week (normally 40 hours).
You must average out their worked hours over the previous 52 weeks to find out how much holiday entitlement they have in that month. You are no longer allowed to use 12.07% or a 3 month average (changed in April 2020).
Staff also have other rights when it comes to holiday pay. For example, they accrue holiday entitlement while off work sick or during maternity, paternity and adoption leave.
What Happens If I Don’t Pay Holiday Pay?
Holiday pay is a legal entitlement for ALL workers. If you think that you’ve got a legitimate reason not to pay holiday pay, you should be prepared to prove this when challenged. In court. Paying legal fees of £300/hour plus VAT.
If you don’t pay a worker holiday pay, then you would be liable to legal action. A worker who believes they should have been paid holiday pay for their annual leave can take you to an employment tribunal.
Tribunal claims for holiday pay are seen as “black and white” cases, which means you either paid holiday pay or you didn’t. Bit like minimum wage. So you would have to prove that you have evidence of payment or that the employee has taken their holidays and been paid. It is not a matter of interpretation.
Of course, you could reach a settlement before it reaches an employment tribunal, but the costs are likely to be in the thousands of pounds. If you go to a tribunal and lose, you’re likely to face a significant legal fee as well as paying compensation to the worker and their legal fees.
Remember that your defence can’t be “well they don’t work full time, so they are sort of on holiday the rest of the week when they are not working, so it is not a big deal”.
Holiday is paid time off, not just time off.
If you think you might be in this situation, it would be wise to review your holiday pay now before any problems arise.
What happens if I haven’t paid holiday pay to zero hours or casual workers?
You will need to start doing so immediately. Claims for unpaid holiday pay can go back two years. Better to start paying the holiday now, going forward, and hope that they don’t start a tribunal claim for the unpaid holiday before it is out of time.
Call us if you would like to discuss the best way forward.
How Do I Protect My Business When It Comes To Workers And Holiday Pay?
If you’re unsure what you need to pay workers who don’t have a written contract, you should review your situation now. The best way is to speak to us and get solid employment contracts in place.
The potential penalties and costs are significant and it’s not worth taking any risks when it comes to employment law. If you’ve got a lot of workers who don’t have employment contracts, they still have rights.
Nowadays the employment contract protects the employer much more than it protects the employee.
For example, if you offer employment contracts you can outline certain factors to ensure you are protected as an employer. That might be notice periods, for example – without a contract, workers can leave with just 1 weeks’ notice, no matter what their length of service..
It might be that you don’t offer any employment contracts, which means it is just a case of when, not if, you end up in tribunal.
But you should regularly review the situation with the help of legal experts.
If you want any help with holiday pay, employment contracts and any employment or HR issues, Gap HR are here to help. Give us a call on 01491 598 600 or drop us a line at firstname.lastname@example.org and we can discuss.