Umbrella workers have the same right to paid holiday as any other employee. The trouble is that holiday pay inside umbrella companies is often misunderstood. In some cases it is handled poorly. In a few cases it is used to reduce a worker’s real earnings without them realising.
This guide explains how holiday pay should be calculated, what to expect on your pay slip, and the common tricks you need to watch for.
Do Umbrella Employees Get Holiday Pay?
Yes. If you work through an umbrella company in the UK, you are an employee of that umbrella. That means you get statutory holiday rights. The standard entitlement is 5.6 weeks of paid holiday per year, which equals:
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28 days for someone working a full year
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12.07 percent of hours worked (the most common method used by umbrellas to calculate accrual)
The holiday pay is funded from the assignment rate that the recruitment agency pays the umbrella. It is not an extra bonus. It is part of your overall pay package.
How Holiday Pay Should Be Calculated
Most umbrellas use the 12.07 percent formula. Here is how it works:
Holiday pay = Gross taxable pay x 12.07 percent
Example:
If your gross taxable pay for a period is £800, your holiday pay accrual for that period should be:
£800 x 12.07 percent = £96.56
That amount should either be:
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Accrued and held for when you book time off, or
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Rolled up and paid each week with a clear item on your pay slip
Both methods are lawful as long as they are transparent.
Accrued vs Rolled Up Holiday Pay
Accrued
Your holiday pay is saved and paid out when you take time off. This keeps things simple and helps you avoid overspending.
Rolled Up
Your holiday pay is paid each week inside your normal wages. The key rule is visibility. The holiday amount must be shown as a separate line on every pay slip.
If your umbrella says holiday pay is rolled up but you cannot see it clearly, treat that as a warning sign.
Common Tricks to Watch For
Although most umbrella companies behave responsibly, there are some common issues that workers report again and again.
1. Not Paying Out Accrued Holiday Pay at Year End
If you build up holiday pay during the year, it belongs to you. Unscrupulous umbrellas sometimes try to keep unused funds by claiming workers did not ask for it in time.
This is not acceptable. Your umbrella should warn you well before any cut off.
2. Misleading Holiday Pay as “Included in Rate”
Agencies sometimes advertise a pay rate that quietly includes holiday pay. This makes the pay look higher than it really is.
Always ask whether the rate is PAYE, umbrella, or umbrella with holiday pay included.
3. Paying Holiday Pay Out of Employer Costs
Employer costs (such as Employer NI, pension, and the apprenticeship levy) must never be taken from your holiday pay. Holiday pay comes from your gross taxable pay only.
4. Keeping Holiday Pay When a Worker Leaves
If you leave the umbrella, any unused holiday pay must be paid to you. It is unlawful to keep it.
5. Rolling Up Holiday Pay but Hiding It
Some umbrellas roll up holiday pay without showing it clearly. This creates confusion and can disguise shortfalls. If you cannot see a clear holiday line, challenge it.
How to Check You Are Being Paid Correctly
A few simple steps help you stay in control.
Check your contract
Your contract should state:
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Your holiday entitlement
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How holiday pay is calculated
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Whether it is accrued or rolled up
Check every pay slip
Look for a line called:
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Holiday Pay
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Holiday Accrual
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Holiday Pay Paid
If it does not appear, ask why.
Keep track of your hours and rate
You can calculate 12.07 percent yourself. If the numbers do not match, raise it with payroll immediately.
What To Do If Something Seems Wrong
If your holiday pay looks incorrect or unclear:
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Ask your umbrella for a written explanation
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Request a full breakdown of your pay, including the holiday element
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Keep records of all communications
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If they refuse to help, consider switching to a reputable umbrella
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If needed, raise the matter with ACAS
Good umbrellas are transparent. They welcome questions and make everything easy to understand. If they refuse to help, consider switching to a reputable umbrella. Our Top 10 Umbrella Companies list can help you compare trusted options.
Final Thoughts
Holiday pay should be simple. You’ve earnt it. You should see it. You should receive it when you take time off or when you leave the umbrella.
Any umbrella that hides, withholds, or confuses holiday pay is not acting in your best interest.
If you want to protect your income, understand the 12.07 percent rule, check your pay slips, and challenge anything that looks off. A good umbrella will always be happy to explain every number.
