Holiday Pay

Holiday Pay

There has been a lot of talk in recent weeks regarding how umbrella companies handle holiday pay, with several coming under the spotlight for misappropriating contractors holiday pay.

Many contractors will be engaging with umbrella companies for the first time this tax year due to the changes to IR35 legislation. As a result they have never had to be concerned with holiday pay and may be unaware what their entitlements are.

Holiday pay is a legal right for all employees in the UK. If a contractor is engaged via an umbrella company they are deemed an employee and therefore fully entitled to holiday pay.

The contract of employment should clearly state the annual leave entitlement. Most umbrella companies will offer the statutory amount which is 20 days plus 8 bank holiday days or 5.6 weeks a year.  This means that the contractor is entitled to take up to 28 days (including bank holidays) off work per year and will be paid for those days. One of the perks of being a contractor is deciding when to work, so a contractor may decide to take more than 28 days off a year but they will only be paid for up to 28 days.

We offer our contractors the opportunity to have their holiday pay accrued or advanced to them each time they are paid, leaving them to decide when they want their holiday pay paid out to them. Advanced holiday pay is shown as a separate line item on each pay slip, and the total accrued, advanced and redeemed amounts are shown for both the current period and year to date.

And most importantly: i4 never retain contractor’s holiday pay as our “income”: all accrued holiday pay is paid to the contractor prior to an employment being ended.