Contractors like being employed by umbrella companies because it’s simple.
It’s convenient too; contractors don’t have to worry about burdensome administrative tasks, nor endure the stress of managing their own tax affairs. Instead, the umbrella company collects payment from an end client and deducts taxes and National Insurance (NI) contributions before paying the contractor.
Those workers benefit too from similar employment rights to permanent staff, such as sick pay, maternity or paternity pay, and statutory paid holidays.
But how does umbrella company holiday pay work?
Do I receive holiday pay from an umbrella company?
Yes, contractors operating through an umbrella company are entitled to holiday pay.
The law in the UK states that anyone who is employed full-time, part-time, or even on a zero-hour contract should receive holiday pay.
That also applies to contractors employed by an umbrella company.
How does holiday pay work with an umbrella company?
You should check your holiday entitlement with your employer (the umbrella company).
According to government guidance on working for an umbrella company, your holiday pay must be deducted from the assignment rate for your job and then paid back to you when you take annual leave.
All PAYE employees are entitled to 5.6 weeks of holiday in a year (or 28 days).
The relevant calculations will be made by the umbrella company, which normally includes a dedicated line for holiday pay on payslips you receive (whether that’s weekly or monthly).
There are some umbrella companies who will offer you the chance to have holiday pay retained and paid to you at a later date. Indeed, some workers like the idea of a lump-sum payment in the future.
We’d strongly advise that you check arrangements for holiday pay with your employer.
How does holiday pay work for umbrella employees?
For every hour that an umbrella company employee works, they’ll accrue a certain amount of holiday pay – usually calculated at 12.07 per cent of the agreed hourly rate.
If they want to take a holiday, the umbrella company must be informed so it can pay out.
Employees who have not taken any eligible holidays, or still have annual leave left, may be paid this at the end of the tax year.
Again, be sure to find out what the policy is for your umbrella company.
How much holiday pay does employees of an umbrella company receive?
The amount of holiday pay employees of an umbrella company receive is typically calculated as a percentage of their hourly rate – usually around 12.07 per cent.
However, some umbrella companies may offer a different rate. It’s definitely worth asking.
As mentioned above, the legal requirement for annual leave is 5.6 weeks a year, meaning an employee will normally have 46.4 weeks when they’ll be working.
Contact Umbrella Tracker
At Umbrella Tracker, we’ve worked hard over time to establish a reputation for sourcing only the best umbrella tracker companies, helping contractors find the best payroll solution for them.
We provide a UK comparison service that assesses umbrella companies assessed and vetted by experts and added to our Preferred Supplier Lists (PSLs).
To learn more about what we do, or if you have a question about holiday pay from umbrella companies, don’t hesitate to contact us today by completing the handy form on our website.
Alternatively, you can call us by dialing 0203 026 3303.
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