Why It Makes Sense to Pay Holiday Pay When Workers Aren’t on Site

Particularly in construction, work can be unpredictable. You might find yourself between jobs, waiting on materials, or facing bad weather. When your workers aren’t on site, it can be tempting to skip paying holiday pay. However, there are compelling reasons to pay holiday pay during quiet weeks, and doing so could ultimately save your business money.

Why Paying Holiday Pay Matters

1. You Could Miss Out on NI Savings and State Benefits

Both employers and workers need to consider National Insurance (NI) thresholds. Let’s break it down:

Employers and Workers

• Primary Threshold: If a worker doesn’t earn enough in a week or month, they may miss out on NI contributions toward their state pension and benefits.

• Secondary Threshold: If you (the employer) don’t pay enough wages to exceed the NI threshold, you won’t pay employer's NI—but you also won’t benefit from your Employment Allowance.

  
  

If you don’t run payroll during a quiet period, you risk:

• Losing that week’s worth of National Insurance allowances.

• Losing a week of NI contributions. If a worker earns under the NI threshold, they may miss a qualifying week for state pension or benefits.

• Employers only pay Employer's NI above a certain wage level.

• Possibly missing out on reducing your Employer NI using the £5,000 UK Employment Allowance.

  
  

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Real Example: How Timing Saved £80

A client had two workers off-site for a week, waiting for a new job to start. Each had holiday pay saved up. Instead of adding holiday pay on top of an earlier week’s wage, the workers and employer processed holiday pay during the week when the workers were not on site.

• Payroll still ran that week.

• The employer used the NI allowance (£43).

• Employees used the NI allowance (£19 x2).

• A week of NI contributions was added to the pot.

  
  

Multiply that across several years and several workers, and that’s a decent saving.

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2. Zero-Hours Workers Still Get Holiday Pay

Don’t forget—zero-hours and casual workers still earn holiday pay based on hours worked. This is usually around 12.07% of their total hours. Paying it when workers are not working helps:

• Keep their records accurate.

• Avoid large lump sums later.

• Help them stay financially stable.

  
  

3. It Smooths Out Cash Flow

Paying holiday pay during quiet periods is often easier than facing a large payout all at once when work ramps up again or if someone leaves. It also spreads out payroll costs, which aids in planning and keeps your financial records tidy.

4. It Keeps You Compliant

If you choose to pay holiday during downtime, make sure to:

• Show it clearly on the payslip (e.g., “Holiday Pay – 5 Days”).

• Update their holiday balance.

• Keep records of what you’ve paid.

  
  

This way, you're covered if there are ever questions.

5. The Long-Term Benefits of Consistent Holiday Pay

Paying holiday pay consistently can lead to a more satisfied workforce. Workers appreciate knowing they will receive their holiday pay, even during slow periods. This can enhance morale and loyalty, reducing turnover rates.

6. Planning for Future Quiet Periods

Anticipating quiet periods can help you manage your payroll more effectively. By planning ahead, you can ensure that you have the funds available to cover holiday pay. This proactive approach can prevent financial strain when work slows down.

In Summary

✔ Workers still earn holiday pay, even on zero-hours.

✔ UK employers can save NI using the Employment Allowance.

✔ Workers may lose qualifying NI weeks if not paid.

✔ Paying holiday during quiet weeks helps with cash flow.

✔ Real savings are possible (like our client’s £80 example).

Need Help With Payroll or NI Planning?

We work with businesses to keep payroll simple, compliant, and cost-effective. If you're not sure when to pay holiday or want to make the most of tax reliefs, get in touch and we’ll help you.