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  • Crawford Temple

How Does Holiday Pay Work Through An Umbrella Company?

Anyone contracting through an umbrella company is entitled to receive holiday pay in the same way that an employee at any other company would. We take a look at what holiday pay is and how it is calculated so you can ensure that you’re getting what you’re entitled to.

Are you entitled to holiday pay?

The government states that “almost all workers are legally entitled to 5.6 weeks’ paid holiday a year (known as statutory leave entitlement or annual leave).” This includes agency workers or contractors employed through an umbrella company. Your employment contract will outline how many days you’re entitled to and whether this includes Bank Holidays.

Accrued or Rolled Up?

Your employment contract with an umbrella will typically state that your holiday will accrue. This means that you ‘build up’ your holidays with your entitlement increasing with every month that you work. You then claim your holiday when you are away from work. Alternatively you can request your holiday pay is paid as ‘rolled up’ or ‘advanced’. This method means that your holiday pay is added to your pay, whether that’s weekly or monthly. While this means that your holiday pay is paid with every pay cheque in advance, it’s important to remember that you won’t get any holiday pay during the time you take for your leave. It is up to you which method you prefer.

If you’re a contractor employed by an umbrella company, your holiday pay is covered in the ‘uplifted’ rate that your umbrella receives from the recruitment company.

How much holiday pay are you entitled to?

The rates of holiday pay are roughly the same for all contractors and work out at 12.07% of your hourly rate. This rate is calculated by dividing the proportion of weeks’ leave per year by the amount of remaining weeks.

This calculation can be expressed as:

5.6 weeks ÷ 46.4 weeks = 0.12069 (rounded up to 12.07%).

What happens if you don’t use your full holiday entitlement?

Your employment contract will specify a Holiday Year, as many employment contracts do. If you take rolled up holiday pay this will have little impact as you are receiving your holiday entitlement as it is accrued.

If you take accrued holiday pay then you should familiarise yourself with the terms around the holiday year as many companies will operate a ‘use it or lose it’ policy. This means if you do not claim all your holiday entitlement in that holiday year it would be lost but some companies will allow you to request that this is carried forward to the next holiday year. Professional Passport has extra layers of transparency required from providers to workers to ensure you are always fully informed. Your pay reports will show how much holiday pay has accrued and been paid in the period, as well as any additional balances.

In the run up to the holiday year end if you have a balance you will be alerted in writing so you are clear on your options and to ensure you do not miss out.

If you're looking to work with a provider that’s earned a legitimate seal of approval, head to the Professional Passport Approved Providers list.

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