Holiday Pay for Zero-Hours and Variable-Hours Carers in 2026/27

How holiday pay works for a zero-hours carer in 2026/27

A zero-hours carer earns paid holiday at 12.07 percent of every hour they work, and you either bank it for them to take later or pay it out as a rolled-up uplift on each payslip. That is the whole rule in one sentence. The detail underneath it is where care agencies lose money, either by underpaying staff and inviting a claim, or by overpaying and quietly eroding a margin that is already thin.

Start with the entitlement everyone shares. Every worker in the UK is entitled to 5.6 weeks of paid annual leave, which is 28 days for someone doing a five-day week, capped at 28 even for longer weeks. That figure comes from the Working Time Regulations 1998. For a full-time worker it is easy: they take their 5.6 weeks and get paid their normal wage. For a carer whose hours swing from 12 one week to 43 the next, "a week of holiday" and "normal pay" both need defining, and that is what the 12.07 percent method and the 52-week average exist to do.

This guide is written by LOYALS, a King's Cross firm of chartered accountants that runs weekly payroll and council invoicing for London home care agencies, so the examples below are the ones we actually see land on the pay run. The rules changed materially in April 2024, and a lot of agency software and legacy contracts have not caught up. If your handbook still says holiday pay is "included in your hourly rate", this is the post to read before your next audit.

Who counts as an irregular-hours or part-year carer?

An irregular-hours worker is one whose paid hours in each pay period are, under their contract, wholly or mostly variable. That is the legal test, and it describes most domiciliary care rounds precisely: the carer is offered whatever calls the rota throws up, and no two weeks match. A part-year worker is one who is only required to work part of the year, with periods of at least a week where they neither work nor get paid. Think term-time-only staff, or bank carers who are stood down for whole weeks.

Why does the label matter so much? Because only these two groups can use the 12.07 percent accrual method and rolled-up holiday pay. A carer on a fixed 30-hour salaried contract does not qualify, even if their shifts move around within the week. Get the classification wrong and you apply the wrong method to the wrong person, which is one of the more common findings when HMRC opens a National Minimum Wage check on a care provider. If you run a mix of guaranteed-hours and zero-hours contracts, and most agencies do, you are running two holiday-pay methods side by side and your payroll has to know which carer sits where.

The regulator that cares about your finances here is not just HMRC. The Care Quality Commission (CQC) looks at financial viability and well-led governance, and a provider that cannot evidence correct pay is a provider with a governance problem. LOYALS acts as the outsourced finance department for care agency accountants precisely so this classification is set correctly on day one and the two methods run cleanly in parallel. For the official definitions, the government guidance on holiday entitlement and pay for irregular-hours and part-year workers is the source to keep bookmarked.

The 12.07 percent method and rolled-up holiday pay

Rolled-up holiday pay means adding a 12.07 percent uplift to each payslip instead of paying the carer when they take time off, and since 1 April 2024 it is lawful again for irregular-hours and part-year workers. For roughly a decade it was unlawful across the board after a European court ruling, so a whole generation of care handbooks were rewritten to stop doing it. The reform in the Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 brought it back, but only for these two groups and only for leave years beginning on or after that date.

Where does 12.07 percent come from? A full leave year is 52 weeks. Take off the 5.6 weeks of holiday and a worker is actually on the job for 46.4 weeks. Holiday of 5.6 weeks expressed as a percentage of 46.4 working weeks is 12.07 percent. So for every hour a carer works, they earn 0.1207 of an hour of paid holiday. On the 2026/27 National Minimum Wage of £12.71 for workers aged 21 and over, that is about £1.53 of holiday pay for every hour worked, paid as a separate line and clearly labelled.

The itemisation is not optional decoration. Rolled-up holiday pay has to be shown separately on the payslip so the worker, and anyone checking, can see it is genuinely additional. Bury it and you lose the evidence that you paid it at all, which turns a compliant arrangement into an indefensible one the moment a carer files a claim or an inspector asks. Where a carer takes actual time off in a rolled-up arrangement, the pay has already been given across the year, so the leave itself is unpaid at the point it is taken, which is exactly why the separate line matters for the conversation you will have when they book two weeks off.

One practical point from our own pay runs: across the home care agencies we run payroll for, correctly applied rolled-up holiday pay adds close to 12 percent to the direct wage line, and travel time between calls adds several percent more on top before you reach employer National Insurance and pension. Agencies that modelled their council rates on contact time alone almost always find the true cost per paid hour is higher than the number they quoted. If you want to see how that cost stacks up in full, our guide on home care cost per hour builds it line by line.

The minimum wage trap that catches care agencies

Holiday pay must be paid on top of the minimum wage, so the moment you treat any part of a £12.71 rate as holiday pay, you have underpaid. This is the single most common holiday-pay error HMRC finds in social care, and it is worth walking through slowly because it looks harmless on the payslip.

Say you advertise a carer role at "£12.71 an hour including holiday pay". If holiday is genuinely inside that figure, the basic pay is £12.71 divided by 1.1207, which is about £11.34 an hour, with the remaining £1.37 counted as holiday. Basic pay of £11.34 is below the £12.71 National Minimum Wage for 2026/27, so every hour that carer works is a minimum wage breach. Multiply that across a 46-carer agency and several years, and the arrears plus penalties reach into six figures fast. The fix is small but non-negotiable: the wage is £12.71, and holiday of 12.07 percent goes on top, taking the paid rate to about £14.24 an hour.

Travel time makes this sharper still in domiciliary care. Time spent travelling between clients counts as working time for the minimum wage, so it must be paid, and it also counts as hours worked for the 12.07 percent holiday accrual. Agencies that pay and record contact time only understate the wage bill, understate the holiday that has built up, and drift below the minimum wage without meaning to. We cover the mechanics of that specific problem in minimum wage for domiciliary carers and the averaging trap. HMRC sets out how holiday pay and the minimum wage interact in its guidance on calculating the minimum wage, and the Homecare Association publishes a minimum price for homecare that builds these costs in, both worth reading before you agree your next council rate.

The 52-week average and what Harpur Trust changed

For a worker with no fixed hours who takes holiday as actual time off rather than rolled-up pay, a week's holiday pay is the average of their pay over the last 52 weeks in which they were paid. You look back up to 104 weeks to find 52 paid weeks, skipping any week where they earned nothing. This 52-week reference period replaced the old 12-week one on 6 April 2020, and it still applies in 2026/27. For a carer whose hours peak in winter and dip in summer, averaging over a full year gives a fairer figure than a snapshot ever could.

The reason the law is shaped the way it is comes down to a Supreme Court case. In Harpur Trust v Brazel in 2022, the court held that a part-year worker on a permanent contract, a term-time music teacher, was entitled to the full 5.6 weeks averaged over the reference period, and that employers could not pro-rate her holiday down using the 12.07 percent cap. That produced the odd result that a part-year worker could end up with proportionally more holiday than a full-year colleague. The government response was to legislate, for leave years from 1 April 2024, the 12.07 percent accrual and rolled-up option for irregular-hours and part-year workers, which is the framework we have now. You can read the ruling itself on the Supreme Court's Harpur Trust v Brazel case page, and Acas keeps a plain-English summary of the current rules for irregular-hours and part-year workers.

What does this mean in practice for your agency? If you have chosen rolled-up pay for your zero-hours carers, you will rarely touch the 52-week average for them, because their holiday is settled each payslip. You will still need it for any salaried office or care-coordination staff who take leave the traditional way, and for any carer you have deliberately kept on a bank arrangement without rolling up. Running both correctly is the job, and it is the reason a specialist payroll matters more here than in almost any other sector.

Five holiday-pay mistakes HMRC and tribunals find in care

These are the errors that turn up again and again when a care provider's payroll is reviewed, whether by us on onboarding, by HMRC on a minimum wage check, or by a solicitor building a tribunal claim. None of them is exotic. All of them are avoidable with the right pay run.

What this means for your agency: what to do before your next pay run

The practical work here is a short checklist, and most of it can be done before the next payslip goes out. Correct pay is cheaper than back pay, and far cheaper than a penalty.

1. Read your own contracts. Do they say holiday is "included in the hourly rate"? If so, that wording needs fixing, and you need to check whether basic pay has been dropping below £12.71 as a result.
2. Sort your carers into the right group. Irregular-hours and part-year carers can use 12.07 percent and rolled-up pay. Fixed-hours staff cannot. Label each contract type in the payroll.
3. Put holiday on top, not inside. Confirm the wage is at least £12.71 for over-21s and the 12.07 percent uplift is a separate, labelled line on the payslip.
4. Capture travel time. Reconcile paid hours against your rota software so travel between calls is paid and the holiday accrued on it is not lost.
5. Settle leavers properly. Pay accrued but untaken statutory holiday from the current leave year when a carer leaves.
6. Keep the evidence. Payslips, contracts and the minimum wage calculation should be ready to show HMRC or CQC without a scramble.

None of this is complicated once the pay run is set up correctly, but it does not fix itself, and the cost of getting it wrong lands on the agency, not the software vendor. LOYALS runs weekly payroll, council and private invoicing and the minimum wage evidence for London home care agencies, so holiday pay is handled correctly on every run rather than reconstructed the week before an inspection. That is the difference between a compliance job you dread and one you never think about.

Want this handled for you? Our care agency accountants run the full outsourced finance department for home care providers, with weekly payroll, travel-time reconciliation, rolled-up holiday pay and council invoicing built in, from £995 a month.