Despite what you may think, being a contractor who is employed via an umbrella company means that your employment entitles you to holiday pay.
In the same way as other people employed by the end client that you work for you are entitled under UK legislation to 28 days’ holiday a year (including bank holidays). The only difference is that you are being employed by an umbrella company.
How does it work?
Many umbrella companies like to keep the rules on holiday pay simple by dividing the number of weeks that your statutory leave entitlement gives you (in most cases 5.6 weeks or 28 days) by the number of remaining weeks in the year. You will then see that rolled into your payslip on a weekly or monthly basis, depending on how you receive it. If you receive this “rolled up holiday pay” you won’t receive any separate holiday payments when you take time off work.
The alternative to this is that some umbrella companies choose to withhold a certain amount of your weekly pay. This is then paid to you in the standard way when you are on holiday.
Whichever method, the outcome remains the same and you will receive the amount owed to you for your holiday entitlement and your umbrella company must apportion your holiday pay separately on your payslip rather than include it in your “basic pay”.
Mistakes shouldn’t happen but they do
Your umbrella company must always ensure that you are paid correctly for your statutory holiday entitlement, but you should always be vigilant and check your payslip as sadly, mistakes do happen from time to time.
One of the biggest areas where errors or misunderstandings occur is if you don’t take all your entitlement you can lose your holiday pay unless you and your umbrella company have a prior written agreement, so make sure you are aware of the policy.
How Holiday Pay Works at Pendragon
We have followed legislation guidelines closely to create our policies, ensuring that our contractors are always compensated accurately for their holidays with the entitlement meeting the statutory requirement of 5.6 weeks for a complete year to a maximum of 28 days. (If you become employed part way through the year, your entitlement is calculated on a pro rata basis).
We do not carry over any unused holiday entitlement into the next leave year, except as provided for in the Working Time Regulations and any unused holiday pay will be refunded to you if you leave or at the end of the leave year, whichever comes first.
For more information about our holiday policy and other entitlements through Pendragon Umbrella, why not contact one of our experienced team who can talk to you about how employment with Pendragon works.