June 19, 2023

Understanding holiday pay for contractors

With the long nights behind us and the sun beginning to shine (a little more often, anyway), many of us start thinking about enjoying some well-earned time off.

With the holiday season just around the corner, we thought it was the right time to talk about holiday pay for contractors.

For some contractors, it’s just a basic understanding of whether you get paid holiday pay or not. For others, it’s a case of how, when, and how much.

Holiday pay has been a hot topic in the umbrella industry for some time, so why all the fuss?

Contractors need to understand holiday pay rights.

First and foremost, if you’re a contractor working via an umbrella company, and your income is treated via the UK PAYE scheme, you should qualify for statutory holiday pay.

The amount of pay that you qualify for will differ depending on the number of hours or days you work, but, in basic terms, for every hour or day that you work, an amount of money will be set aside or paid to you, dependent on your contract terms, as holiday pay.

Contractors can lose holiday pay.

The commonly accepted process for holiday pay is for the umbrella company to accrue it while you work and then pay it to you when you take your holiday. This ensures you are still paid when you take a break.

However, some contractors working through umbrella companies have been reported to have lost out on accrued holiday pay because they did not take holidays within the holiday year, as defined in their employment contract.

While the umbrella companies did nothing illegal, there remained questions about whether they had done enough to ensure contractors took holidays and received their holiday pay.

According to an article by Professional Passport, a leading independent assessor of payroll compliance,  “holiday pay for umbrella workers has attracted contentious headlines as some providers have sought to profit from withholding unclaimed holiday pay.” The article said, “Many of the reports on holiday pay retention suggested that providers (umbrella companies) relied on contractual terms that were often not read or understood by the workers so that many workers were completely unaware that they had lost holiday pay entitlement.”

The risk of losing out is why TJW Contract Solutions urge contractors to double-check the terms and conditions of their employment contracts.

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 don’t lose their holiday pay entitlement.

If you’re concerned about whether you might be at risk of losing your holiday pay entitlement, then contact us for a confidential chat on 01784 270300