These are extremely rare in the automotive industry, this is because there is usually enough work to guarantee a minimum amount of hours per employee, or the person is self-employed.

Zero hours and variable hours contracts are used when an employer wants a flexible working relationship with an employee. The contract agrees a fixed hourly rate but does not guarantee the employee a fixed number of hours per week. Alternatively, it is possible to set a minimum number of hours per weeks using this contract, with the exact hours of work to be determined in accordance with business need.  

And like busses – I have not issued a Zero hour contract for a long time – and now I have 2 in one month. Does this mean that times are changing? Are employee needs changing, or is this a random occurrence? 

Time will tell, but what does need addressing right now is the calculation for the annual leave entitlement.

It is not straight forward.

It has actually been reviewed by the Supreme Court that based on current calculations ” part-year workers are entitled to a larger annual paid holiday entitlement than part-time workers who work the same number of hours across the year but work fewer hours each week consistently across the year. ” 

It is a tricky one to navigate, please note that it is not legal to pay for their leave as extra on their pay day, you must calculate the leave accrued over the past 52 weeks. 

For example, employers would usually do this :
“You have worked 20 hours this month, I will pay you extra to cover the annual leave accrued, whether you asked for annual leave or not”

This is not legal. Note that annual leave it legally intended as a break, not to top-up pay. 

What are you meant to do? 

You currently have to do a calculation that reflects the amount of work completed – at the time when the employee asks for annual leave. 

– This is the current process, and it is under review, read more here

This is the calculation : 

Step 1 ) Employee asks for annual leave

Step 2 ) Employer adds up all of the hours that the employee worked each week

Step 3 ) Employer divides this sum by the amount of hours that the employee has worked this annual leave year (do not include weeks of no work)

Step 4 ) You multiply the total by 5.6 (the amount of annual leave that they are entitled to)

Step 5 ) This is the forecast for how much annual leave the employee has accrued for the year. 

When you do this calculation, you may see that it does not look right, for example : 

Your employee has been with the Company for 6 weeks, here are their hours:

Week 1 – 6 hours

Week 2 – 30 hours

Week 3 – 0 hours

Week 4 – 20 hours

Step 2) Add up all of those hours = 56
Step 3 ) 56 hours divided by 3 weeks of work = 18.66

Step 4 ) Multiple 18.66 by 5.6 weeks = 104 hours.

[if the employee worked 1 hour in week 3, their entitlement would change to 79.8 hours entitlement, so by working an extra hour, their entitlement goes down by 24.2 hours]

And here lies the problem – this is why the calculation (or reference period) is under review. 


Technically the Zero hour contract entitles the employee to 104 hours of annual leave after just 3 weeks of work. 

What is the advice at the moment? 

Whilst this is under consultation, divide the forecast sum by how much of their annual leave year has passed.  

= 104 hours for the whole year. You can then divide it by 12 to get that first month so that they do not take more than they have accrued. Then at the end of the year can top-up/deduct to make sure it comes to the full amount.

This is not an easy contractual term to manage, and it is important to do what is right by the employee, without causing any surprises (my number 1 rule). So please explain this calculation to all Zero hour employees, and make sure that you both understand the calculations. 

And remember – if your employee is consistently doing a minimum of hours, then they are technically not on a Zero hour contract and you need to move them onto a new contract that reflects the minimum hours conducted. 

Do not get complacent with this calculation and process, and make sure to speak to your accountant about how to process this and to make sure the end of year calculations are correct.