June 27, 2023

Ensuring your contractors get the holiday pay they’re entitled to.

Holiday pay may not be the first thing on your mind when placing contractors, but with official summertime almost upon, it’s definitely worth a quick review.

For contractors working through umbrella companies, the issue of holiday pay remains a subject of contention. From a basic understanding of rights to question marks about unethical practices, holiday pay remains a hot topic of conversation in the umbrella sector.

So, what are the issues surrounding holiday pay, and what implications could they have on recruitment agencies?

Holiday pay - a statutory right for contractors.

Contractors working via umbrella companies should accrue holiday pay for each hour or day they work. However, due to the structure of the legislation surrounding holiday and holiday pay, there are situations where contractors can lose their accrued holiday pay.

Consider this as a simple example.

  • Your client has an assignment that they need to complete in a specific timescale.
  • Your contractor accrues holiday pay for each hour or day they work with the accrued holiday pay paid when your contractor takes a holiday.
  • Your contractor can’t take a holiday because they need to meet the timescales of the assignment.
  • Your contractor’s holiday pay remains unclaimed.

So what happens to the accrued holiday pay?

What happens to unclaimed holiday pay?

An article recently published by Professional Passport, a leading independent assessor of payroll compliance, stated, “We’ve observed various reports of certain umbrella providers which have retained contractors’ holiday pay by relying on terms in their contracts which are either unread or misunderstood. These contractual arrangements make it clear that unused allowances will be lost if not taken which, although it makes the practice legal, in our opinion is definitely not moral.”

So if the contractor doesn’t claim the holiday pay, the umbrella company gets to keep it.

Contractors losing holiday pay poses reputational risks to recruitment agencies.

The reputational risk posed to recruitment agencies due to contractors not receiving their accrued holiday pay is high.

Understandably, contractors can quickly challenge and complain if they feel they are losing out financially.

Recruitment agencies may be unaware of the withheld holiday pay, but their relationship with the umbrella company can result in contractors associating blame. Even more damaging is when contractors take their grievance directly to the end client, creating unwanted problems and strain in the relationship between agency and client.

Both situations present a real risk to revenues.

TJW Contract Solutions - Ensuring contractors get their holiday pay.

At TJW Contract Solutions, our Professional Passport accreditation stipulates that we do everything possible to ensure our contractors receive their holiday pay entitlement.

Our processes are designed and audited to ensure your contractors get what they are entitled to and never lose out.

With TJW Contract Solutions, you can rest assured that your reputation with your contractors and clients is our priority, and we’ll do whatever we can to ensure that your contractors remain happy and content.   

For more information on how TJW Contract Solutions support and protect recruitment agencies, contact us for a chat on 01784 270300