Compliant umbrella companies will not only explain how holiday pay works before you register with them, but they’ll also ensure they process it compliantly and as requested. Frustratingly, this hasn’t always been the case and a few umbrella companies have been accused of retaining holiday pay for themselves – leaving the umbrella employee out of pocket. In this article, we explain how holiday pay should be processed by umbrella companies and provide helpful guidance for those who think they have had holiday pay retained by their umbrella company.
Umbrella companies and holiday pay – what should happen?
When you work through an umbrella company, you become an employee, and the umbrella is the employer. In this arrangement, you should be paid holiday pay which is calculated at 12.07% of your assignment rate. Umbrella companies should show holiday pay on your payslips, and you should be aware of how it will be paid to you by your payroll provider.
Most commonly, umbrella companies process holiday pay in two ways. Option one is to have the holiday pay paid to you each time your payroll is processed. This means you’ll have it paid into your bank account every time the umbrella company processes your payroll. The other option (option two) is to have your holiday pay accrued over a period of time and then sent to you in a lump sum. This is perhaps not the most popular method, but it means you can have a more significant payment at a later date – and this may be welcomed.
Accusations of holiday pay malpractice is one of the main reasons many stakeholders are calling for the government to regulate the umbrella company sector.
What have some umbrella companies been accused of?
Unfortunately, it’s been recently reported that a few umbrella companies haven’t been processing holiday pay fairly. In a well-known example, an FCSA accredited umbrella company was accused of illegally retaining the holiday pay of its workers without the intention of paying it later. As we mentioned earlier, holiday pay is a reallocation of the worker’s assignment rate, and therefore, 100% of it belongs to the worker. Any umbrella that is found to have retained holiday pay for itself is breaking the rules, acting immorally and should be named and shamed. Essentially, it’s theft, and it needs to stop.
What should you do if you have not been paid holiday pay?
Contractor Voice, a website dedicated to supporting the UK’s temporary workforce, has released some helpful information for those who think they’ve had holiday pay retained by their umbrella company.
In a post on LinkedIn (week commencing 6th June 2022), Contractor Voice said the following to its 380+ followers:
“Contractor Voice has been working with lawyers to build a case and recover Holiday Pay on behalf of contractors.
The legal experts have confirmed that the liability of such withholding sits with both the Umbrellas & Agencies – who are complicit in the malpractice.
Contractor Voice is calling all contractors that that have ever engaged via an umbrella and suspect that they may be entitled to Holiday Pay, to register an interest on the website (link to the article and contact form in the comments) to get access to legal advice.”
If you believe your umbrella company owes you holiday pay and they are acting unethically, you can complete a short form on the Contractor Voice website entitled ‘Holiday Pay Campaign Registration Form’.
The Contractor Voice website states:
“Upon successfully submitting [the form], your details will be added to our Holiday Pay Campaign. You agree that the details provided (excluding your personal contact details) can be used for the purpose of promoting and publicising the campaign to achieve redress for contractors that were not paid Holiday Pay to which they were entitled.
By providing the information requested [in the form], you are voluntarily confirming that you believe you were not paid Holiday Pay to which you were entitled by an umbrella company that you are or have been employed by. Being involved in our campaign does not prevent you from personally or via lawyers of your choice making a legal claim for unpaid Holiday Pay. If you intend to make a legal claim, you must act quickly as strict time limits apply. Based on the information you provide we cannot guarantee or give any assurance or advice that any claim will be successful. An actual claim must be made for its full merits to be known and considered.”
Contractor Voice is building a reputation as a leading body representing the interests of temporary workers. While we have no affiliation with Contractor Voice, you may be interested in registering your holiday pay grievances via the form stated above, but it’s entirely up to you.
If you think you’re owed holiday pay, there is more action you can take. You should report your umbrella company for non-compliance, and this can be done by following the instructions in our blog: How to report a non-compliant umbrella company.
You should also speak to the umbrella and let them know you’re taking your dissatisfaction further. Please let us know if you are unhappy with an umbrella (because of withheld holiday pay), and we will happily contact them and see what they have to say for themselves. Send the information you have to info@umbrellacompanies.org.uk. It’s also a great idea to contact other parties within the sector, including Contractor Voice (information above), IWORK, IPSE, Contractor Calculator, IT Contracting, and the two professional bodies referenced in our blog – the Freelancer and Contractor Services Association (FCSA) and Professional Passport. Our article linked above also has the information you need to report the umbrella company to HMRC – which you should do at your earliest convenience.
More information about Contractor Voice
The following biography from the ‘Our Story’ page on the Contractor Voice website will provide you with more information about the company and its objectives.
“The UK’s economy has become dependent on the half million or so temporary contractor workforce across all sectors ranging from the NHS to IT, and literally everything else in between, but with limited union support and no centralised or government body to turn to when they fall foul of abuse within their roles.
Our initial focus is directed towards the fact that tens of thousands of contractors each year are not being paid the Holiday Pay they are entitled to. Temporary contractors are, in the vast majority of roles, temporary employees, so they are entitled to Holiday Pay and the same legal rights just like traditional employees.
The BBC Radio 4 Moneybox programme highlighted earlier this year that the practice of withholding holiday pay is still happening and is widespread across the UK, with umbrellas and agencies being involved in the malpractice.
Around 2 million workers each year are not receiving an eye watering £3 billion per year in Holiday Pay, which is being pocketed by companies and treated as additional income.
The government has done nothing at all to stop this, Contractor Voice was made to increase awareness and lobby for a change in the law so that this immoral practice is stopped and to force the companies that have been involved in withholding Holiday Pay to pay what should have been paid.”
For more information, please visit the Contractor Voice website.
Top 10 umbrella companies
Are you interested in joining an umbrella company you can trust? To help make your life easier and reduce the number of companies you need to review, we’ve collated a list of our top 10 umbrella companies. Our top 10 are accredited by either the FCSA or Professional Passport. And some have special offers at the moment. Please take a look!
