Last year, the Employment Appeal Tribunal ruled against Gary Smith, a past heating engineer at Pimlico Plumbers, regarding backdated holiday pay. However, having appealed further, the Supreme Court has ruled in favour of the previous employee in a ground-breaking case. Keep reading, and we’ll summarise the recent case and remind you of your holiday pay entitlement when working through an umbrella company.
What has happened?
Gary Smith, a heating engineer, was treated like a self-employed worker by his employer and had worked at Pimlico Plumbers for close to six years. During his time at Pimlico Plumbers, he was not entitled to any annual leave or holiday pay entitlement. Having taken Pimlico Plumbers to court and appealing an initial loss, the Supreme Court determined that Gary Smith had worker status, meaning he was entitled to employee rights, including annual leave and holiday pay.
The ruling determined that a worker can only lose their holiday entitlement if an employer presents the worker with the opportunity to take paid annual leave and that the right to claim this will expire at the end of the year.
At the hearing, Lady Justice Simler said:
“If a worker takes unpaid leave when the employer disputes the right and refuses to pay for the leave, the worker is not exercising the right.
Although domestic legislation can provide for the loss of the right at the end of each leave year, to lose it, the worker must actually have had the opportunity to exercise the right conferred by the Working Time Directive.”
What are the experts saying?
Rebecca Seeley Harris, chair of the Employment Status Forum and a previous advisor to the office of tax simplification, told City AM the following regarding Smith v Pimlico:
“Today’s judgment is perhaps one of the most significant I have seen for a long time when it comes to protecting workers’ rights, specifically for the entitlement to paid annual leave.
If the employer cannot evidence this, then the right does not lapse at the end of the year, it carries over and accumulates until termination of the contract. Upon termination, the worker is entitled to a payment in respect of all of the untaken leave.
Technically, this judgment means that any worker – be they self-employed, a gig worker, an umbrella worker – has the entitlement to paid annual leave but that the employer has to ensure that they are made aware of this.
If they don’t, the worker does not lose the entitlement at the end of the year, it begins to accumulate. Also, it is likely that anyone who has recently finished a contract could make a claim, within three months of the end date, if they think they have been short-changed.”
Michael Ford QC, a barrister at Old Square Chambers, wrote the following in an article:
“The judgment is of importance to all workers denied the right to any paid annual leave, usually on the basis that they are not ‘workers’, and to all claims for unlawful deductions from wages, not only those brought in relation to under-paid holiday pay under the Working Time Regulations.”
He continued:
“The implications of the judgment for ‘gig’ workers – to use the hackneyed phrase – is huge. Already, such workers could rely on King to carry over the untaken portion of four weeks’ leave each year and obtain full compensation for it on termination; now, according to the Court of Appeal, they can carry over taken leave as well.”
What should umbrella company employees be aware of regarding holiday pay?
If you work through an umbrella company, it’s important you understand your employee rights and how your holiday entitlement works. Here are some important things to remember:
- When you work through an umbrella company, you become an employee of the umbrella and have access to statutory employee rights, including sick pay and maternity/paternity pay.
- Umbrella company employees are entitled to holiday pay, but it’s important you take this into consideration when you are negotiating your rate of pay with your recruitment agency or direct with your end-hirer.
- When you register with an umbrella company, most providers will give you an option regarding your holiday pay (12.07%) – to have it paid to you each payment frequency or have it accrued so you can have it paid in a lump sum at a later date.
- Holiday pay is your money – not the umbrella company’s. You should never have holiday pay withheld against your will and good umbrella companies will always be transparent. If you ever suspect something unscrupulous is going on, report your umbrella company
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