Holiday Pay

[eek]

Worth saying that following the Harpur Trust v Brazer case - holiday pay is way way more complex than it used to be.

Previously it was take 12.07% of the assignment fee, call it holiday pay and you are good to go.

Post the Harpur Trust Supreme Court decision that simply isn't the case anymore and holiday pay is now determined by 2 separate factors

1) actual length of employment (measured in weeks)
2) average weekly wage...

Both of those items have a serious impact on how umbrellas (and in fact all agencies) will be doing things in the future. I can see a lot of tribunals being required until we see decisions occur and a consensus arrived at...

[mogga71]

Worth saying that following the Harpur Trust v Brazer case - holiday pay is way way more complex than it used to be.

Previously it was take 12.07% of the assignment fee, call it holiday pay and you are good to go.

Post the Harpur Trust Supreme Court decision that simply isn't the case anymore and holiday pay is now determined by 2 separate factors

1) actual length of employment (measured in weeks)
2) average weekly wage...

Both of those items have a serious impact on how umbrellas (and in fact all agencies) will be doing things in the future. I can see a lot of tribunals being required until we see decisions occur and a consensus arrived at...

I must confess that I am a bit thick these days as I am getting old ..... but why does this matter as the Contractors have to pay for their own holiday pay anyway .. regardless of the new rules. it's not as if the Umbrella Companies pay the holiday pay out of their own pocket. We are just pretending that we are taking paid holidays ... it's all totally effed up ... let's be honest. Contractors are actually employing their Umbrella Companies to be their employer.

[cojak]

I think that you don’t just take the money, you actually have to take the holiday off during your contract.

correct me if I’m wrong here Eek.

[eek]

I must confess that I am a bit thick these days as I am getting old ..... but why does this matter as the Contractors have to pay for their own holiday pay anyway .. regardless of the new rules. it's not as if the Umbrella Companies pay the holiday pay out of their own pocket. We are just pretending that we are taking paid holidays ... it's all totally effed up ... let's be honest. Contractors are actually employing their Umbrella Companies to be their employer.

First point - not all the money that appear on an umbrella / assignment rate is yours - it's the rate the agency sends to the umbrella for every day of work you do. From that the umbrella needs to:-

1) cover it's administration costs (margin)
2) pay immediate employment costs (Employer NI / Apprenticeship Levy)
3) save enough money to pay you when you go on holiday (the 12.07%) .

Umbrella / Assignment fee rates meant umbrellas needed to then do calculations in the open that really should be being done privately - and until last week that wasn't really an issue because there was a simple easy to use calculation that generated an answer that a tribunal could accept.

But that simply isn't the case now - now an umbrella firm needs to pay you 0.54 days of holiday (at your average weekly rate not minimum wage) for every week you are under contract. That's easy if you work all the time it's a big problem if you are off ill for a few days as they still need to cover 0.54 days pay even if didn't work that week.

The reality is that agencies should not be advertising limited company rates/ assignment fee/ umbrella rates for any contract that is inside IR35. But they do because people look at the top line rate of pay so if agency 1 advertises a £300 rate and agency 2 advertises (the correct) £200 paye rate - agency 1 gets all the candidates.

[eek]

I think that you don’t just take the money, you actually have to take the holiday off during your contract.

correct me if I’m wrong here Eek.

Yep - all employers have a duty of care that means they as your employer need to ensure you take proper holidays.

To ensure people do take 28 days holiday the law says these holidays need to be paid (and paid at a rate that does not disincentive workers from taking time off - which means workers need to be paid their average weekly wage* when on holiday). This is designed to ensure that workers are willing to take a holiday

But the reverse is also true, the company has to avoid creating an incentive that results in them working rather than taking a holiday.

So let's ignore that you work via an umbrella and imagine you work in a pub. Holiday year end is 31st July and your last week of holiday should be July 25th to the 31st. Last week the manager asked you to work this week you said no but then he offered you double pay if you worked this week.

Now on one level that looks good but it's completely illegal (because the company is failing it's duty of care requirements). And that is the situation the umbrella firms currently find themselves in...

* and see my point above - you still need to be paid for 28 days holiday even if you are off ill for a week or two. And 12.07% is a calculation based on your working 232 days a year, work 222 days a year and the percentage required is very different because it now needs to be 28/250 days rather than 28/260.

[mogga71]

Yep - all employers have a duty of care that means they as your employer need to ensure you take proper holidays.

To ensure people do take 28 days holiday the law says these holidays need to be paid (and paid at a rate that does not disincentive workers from taking time off - which means workers need to be paid your average weekly wage* when on holiday). This is designed to ensure that workers are willing to take a holiday

But the reverse is also true, the company has to avoid creating an incentive that results in you working rather than taking a holiday.

So let's ignore that you work via an umbrella and imagine you work in a pub. Holiday year end is 31st July and your last week of holiday should be July 25th to the 31st. Last week the manager asked you to work this week you said no but then he offered you double pay if you worked this week.

Now on one level that looks good but it's completely illegal (because the company is failing it's duty of care requirements). And that is the situation the umbrella firms currently find themselves in...

* and see my point above - you still need to be paid for 28 days holiday even if you are off ill for a week or two. And 12.07% is a calculation based on your working 232 days a year, work 222 days a year and the percentage required is very different because it now needs to be 28/250 days rather than 28/260.

I am with one of the largest Umbrellas and I only took 9 days off last year. Nobody is tracking holidays as far as I know. I am pretty certain I could have worked every day and they would a) not have known b) not cared.

When you say :

3) save enough money to pay you when you go on holiday (the 12.07%) .

Does that only matter if you have chosen to Accrue Your Holidays?

[eek]

I am with one of the largest Umbrellas and I only took 9 days off last year. Nobody is tracking holidays as far as I know. I am pretty certain I could have worked every day and they would a) not have known b) not cared.

When you say :

3) save enough money to pay you when you go on holiday (the 12.07%) .

Does that only matter if you have chosen to Accrue Your Holidays?

Well

1) that explanation was there to explain how and why an umbrella would argue that it's fair to retain unpaid holiday pay
2) until now it didn't really matter - because while advancing holiday pay is illegal it didn't leave workers worse off and it wasn't an issue if it went to a tribunal and the umbrella's paperwork explained where the money had gone*

but under the new rules (post Harpur / Brazel rules) you accrue 0.54 days holiday for every week you are in contract - even if you aren't working.

So 2 weeks ill and the umbrella needs to pay you 1 day of your average weekly wage / regular rate (including whatever bonus is required to take it to your typical PAYE payrate). Likewise 3 weeks bench time (1.5 days at your previous rate) as you wait for a new contract to begin..

And it really doesn't take long before the 12.07% that used to collected is used up - at which point that money has to come from the umbrellas margin and it takes a lot of £20 to pay 2 days of holiday pay for someone on an assignment fee of £700 a day.

So Harpur Trust v Brazel fundamentally changed how umbrella firms need to work - problem is there is no consensus yet on how things should work and a lot of people hoping that some minor changes will fix things.

* Harpur Trust has also changed that. Until there is a post July 2022 Employment tribunal that also says advanced holiday pay isn't an issue were I an umbrella firm I wouldn't be that comfortable...

[mogga71]

Well

1) that explanation was there to explain how and why an umbrella would argue that it's fair to retain unpaid holiday pay
2) until now it didn't really matter - because while advancing holiday pay is illegal it didn't leave workers worse off and it wasn't an issue if it went to a tribunal and the umbrella's paperwork explained where the money had gone*

but under the new rules (post Harpur / Brazel rules) you accrue 0.54 days holiday for every week you are in contract - even if you aren't working.

So 2 weeks ill and the umbrella needs to pay you 1 day of your average weekly wage / regular rate (including whatever bonus is required to take it to your typical PAYE payrate). Likewise 3 weeks bench time (1.5 days at your previous rate) as you wait for a new contract to begin..

And it really doesn't take long before the 12.07% that used to collected is used up - at which point that money has to come from the umbrellas margin and it takes a lot of £20 to pay 2 weeks of holiday for someone on an assignment fee of £700 a day.

So Harpur Trust v Brazel fundamentally changed how umbrella firms need to work - problem is there is no consensus yet on how things should work and a lot of people hoping that some minor changes will fix things.

* Harpur Trust has also changed that. Until there is a post July 2022 Employment tribunal that also says advanced holiday pay isn't an issue were I an umbrella firm I wouldn't be that comfortable...

Jeez I see what you mean eek. Could be a real game changer. TBH it would be totally unfair on the Umbrellas and I would assume that a lot won't want to take the risk if it happens. Didn't realise advancing holiday pay is illegal but I always thought it looked a bit dodge on my weekly payslip. Holiday pay when I didnt actually have a holiday...hmmm.

Thanks for the info eek.

[cojak]

It’s occurring to me that end clients and agencies are going to be ticked when they realise that inside contractors will be taking holidays mid-contract and the agency can’t do anything about it.

I can see them trying to coerce contractors into not taking those holidays (and getting stamped on if they do try).

[eek]

It’s occurring to me that end clients and agencies are going to be ticked when they realise that inside contractors will be taking holidays mid-contract and the agency can’t do anything about it.

I can see them trying to coerce contractors into not taking those holidays (and getting stamped on if they do try).

See my point that umbrella companies should not have fixed holiday years but instead use starting date anniversaries....