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What contractors should know about holiday pay

One of the advantages of working through an umbrella company is that you will accrue holiday pay, as well as other statutory benefits such as sick pay, maternity and paternity pay.


Here at Umbrella Search we’ve put together a handy guide on umbrella company holiday pay to show you what umbrella companies cover and how to work out how much your umbrella company will pay you.


Do umbrella company contractors get holiday pay?


Because contractors work via his chosen umbrella company, they become employed by that company. This effectively means that they are entitled to receive statutory benefits such as holiday pay.


This is good news for the umbrella company contractors who can now have a guilt-free and paid holiday, secure in the knowledge that their wages will still come through. No more taking a laptop on that hiking trip or having Zoom calls before breakfast.


This is different from limited company or sole trader contractors who, as the self-employed, will not be offered paid holiday days.


How much holiday pay do contractors receive?


If you are a umbrella contractor, you have a legal right to bank holiday pay, and to a minimum of 28 days, or 5.6 weeks, holiday pay per year, as per The Working Time Regulations 1998.


If you contract part-time, this is worked out as follows:


If you work 4 days per week you will receive 22.4 days holiday


If you work 3 days per week you will receive 16.8 days holiday


However, in many contracts you will work different days or hours. If this is the case, holiday pay will be worked out by taking the 12 weeks before the holiday and being an average of the hours you have worked during that time.


How is umbrella holiday pay calculated?


Here are the instructions. Calculate the amount of money in holiday pay that you would receive from the umbrella company as an employee this year. To calculate this, multiply your gross taxable pay by 12.07 per cent.


To learn more about your holiday entitlement and how to calculate it, use this tool on the government website.


What is an umbrella company?

How do umbrella contractors receive holiday pay?


There are two main ways that umbrella company contractors can receive their holiday pay.


The first way is the accrual method.


With this arrangement, the umbrella company would hold back the contractor’s holiday pay until they took the time off.


The other is by you paying us the holiday pay that we have paid for in fixed, advanced amounts when we made the contracts.


Thus, the contractor will get holiday pay every time they are paid, say, every week or every month (so they’ll always be on top of the holiday pay owed), which is the arrangement most umbrella companies use.


Every umbrella company will provide a figure for how much holiday pay you’ve received on a payslip, and you should therefore always be able to refer to a record of the holiday pay that you’ve been given.


So here are the umbrella company holidays and pay again – but what other statutory rights and benefits are umbrella contractors entitled to?


Umbrella company sick pay


Another statutory benefit that umbrella company contractors are entitled to is sick pay.


That is, the fixed pay means that if the contractor cannot work because of, for example, ill health, they will still get paid. Obviously this is a massive sigh of relief to the umbrella company contractor. Breathing a huge sigh of relief.


At present, statutory sick pay (employment insurance payments) is £95.85 a week (that’s what you get paid if your main contractor can’t make you work because you are ill).


Contractors can claim statutory sick pay for up to 28 weeks per year.


To be eligible for statutory sick pay, contractors must meet the following criteria:


They must be an employee of the umbrella company


They need to be earning at least £120 a week, on average, before tax and National Insurance deductions have been taken off. For contractors who have different hours and days of work, that would be calculated as an average of the past eight weeks before the illness strikes.


They will be considered incapacitated for four consecutive days. This includes the weekends but you’ll only be paid for the days when you would have normally worked. These are called qualifying days.


They are not already claiming benefits such as statutory maternity or paternity leave


They have not already exceeded the maximum of 28 weeks' worth of pay


To claim statutory sick pay you must alert your umbrella company within a week. If you are sick for longer than this, you will need a sick note from your doctor.


Umbrella company maternity or paternity pay


Another statutory benefit umbrella company contractors can take advantage of is either maternity or paternity paid leave.


Contractors will be paid 90 per cent of their weekly pay for the first six weeks of maternity leave.


Thereafter, he will receive whatever is the lower of either 90 per cent of his average weekly earnings, or £151.97 per week, for the next 33 weeks.


All in all, this means that contractors will receive paid leave of 39 weeks, which contractors consider to be a great benefit.


Paternity leave allows contractors to have up to two weeks’ paid leave, at 90 per cent of average weekly earnings or £151.97 per week, depending on which is less.


Ready to join an umbrella company?


Having read about the many perks that an umbrella company offers you, such as paid holidays, sick pay, and maternity and paternity pay, you might have decided to switch to an umbrella company.


If that's the case, Umbrella Search is here to help you.


Our umbrella company calculator is the easy way for a contractor to choose an umbrella company for them.


Provide your details and your contractor preferences, and we’ll return a shortlist of the best companies for you, in just minutes.


Why not try for yourself to see how it might work?

 


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