There are several reasons contractors chose the umbrella company route over PAYE agency or limited company. One of these reasons is statutory benefits.
When working through an umbrella company, by law, contractors are entitled to statutory benefits, including paid holiday leave, sick leave and maternity or paternity leave.
If you are considering the umbrella company route and want to find out more about umbrella company statutory benefits and what you are entitled to, Umbrella Search has put together this comprehensive guide.
What are statutory benefits?
In the UK, employees are entitled to receive statutory benefits on top of their salaries. This means that every UK employee is entitled to paid annual leave when they wish to go on holiday or take time off, sick leave if they are too ill to work, and maternity or paternity leave.
On top of paid leave, employers must also offer employees a pension plan if they are over the age of 22 and earn more than £10,000.
What statutory benefits do umbrella company contractors receive?
As umbrella company contractors are employed by their chosen provider, they are entitled to receive statutory benefits like any other employee in the UK.
This is widely considered a great benefit to the umbrella company route, meaning these contractors can take time off and still be paid.
Next we'll take a look in more detail at exactly what statutory benefits contractors receive and how this is calculated.
Umbrella company holiday pay
Every umbrella company contractor is entitled to statutory holiday pay, but how much will you get?
Umbrella contractors are eligible for a minimum of 28 days or 5.6 weeks of holiday. This can sometimes be more depending on the end client's agreement but what you will receive will be clearly stated within your contract.
For contractors working on a part-time basis, your holiday entitlement will be calculated on a pro-rata basis. This means that if you contract 4 days a week you will receive 22.4 days of holiday, or those that contract 3 days a week will receive 16.8 days of leave.
In the case that you end up working on several contracts throughout the year, your holiday leave will be worked out by taking the average time you've worked over the previous 12 weeks prior to your holiday.
In order to calculate how much holiday pay you will receive you can simply multiply your gross taxable pay by 12.07%.
That’s how much holiday pay you will receive, so how will it be paid to you?
When it comes to umbrella company holiday pay there are two different ways this can be paid to contractors.
The first way is through the ‘accrual’ method. Here, the umbrella company will set aside the contractor’s holiday pay and will then pay this to the contractor when they take holiday leave.
The second way is through the ‘rolled up’ advanced method. With this method, the contractor receives their holiday pay each time they are paid. This means that the contractor is always up to date with the holiday pay they are owed.
Whichever method the umbrella company chooses, you will always be able to see how much holiday pay you have received on your payslip, so you can always check if you're up to date with what you are owed.
Umbrella company sick pay
Umbrella company contractors are also entitled to statutory sick pay. This means that if an employee is sick and they can’t work they will still be paid.
Employees, including umbrella company contractors, are entitled to be paid at least £99.35 a week for up to 28 weeks a year if they are too ill to work. Contractors can start to claim statutory sick pay if they are unable to work for at least four days in a row. The fourth day onwards is known as the qualifying day.
Some employers will pay more than the minimum figure of £99.35, which you can check in your contract.
Umbrella company maternity and paternity leave
Umbrella company contractors can also claim maternity and paternity leave.
Contractors going on maternity leave will be eligible for up to 39 weeks of paid leave altogether.
Contractors will receive 90% of their average weekly pay for the first 6 weeks of maternity leave, and then they will be paid either £155.66 or 90% of their average weekly pay, whichever figure is lowest, for the following 33 weeks.
When it comes to paternity leave, in line with other UK employees, contractors are entitled to take 1-2 weeks of paid paternity leave, which is also set at either 90% of their pay or £155.66, depending on which is the lower figure.
Again, depending on the client, some companies will pay more than the statutory amount, so it's always worth checking this before signing the contract.
Ready to take advantage of statutory benefits? Umbrella Search is here to help
Now you know exactly what statutory benefits umbrella company contractors are entitled to receive and how you can calculate this, you may consider it the right time to begin your journey with an umbrella company. After all, this is just one of the many benefits to working as an umbrella company contractor.
If this is the case, Umbrella Search is here to help.
Our team of friendly professionals will work with you to find a selection of the best-suited umbrella company for your needs. Whatever you're looking for, whether it's more holiday leave or a good workplace pension, we will find an umbrella company that's the perfect fit for you.