Have I been paid my Holiday Pay? The question that never goes away!

So once again it rears its ugly head! Umbrella employees indicating they have not been paid their holiday pay. A recent poll conducted by off-payroll.org showed that over 50% claim that they didn't get paid their holiday pay or they couldn't confirm with absolute certainty that this was the case. Not the greatest advert is it?

I hate reading it, whenever I see a post relating to Umbrella Companies being discussed on various forums at the moment, I think what now? I've said in many articles before that this is the industry I work in and very much love, and as we all know whenever there is negativity surrounding Umbrella Companies, it is always articulated as "umbrella companies", not "some umbrella companies", which very much leads to if one is tarnished then we all are, and it's neither fair nor easy to deal with. So naturally when reading various polls and articles being posted by contractorcalculator and off-payroll.org respectively about holiday pay being allegedly "pick-pocketed", I thought here we go again, and the holiday pay mess is the biggest of them all.

So who is affected by this? Who is losing out in all of this? Surprise, surprise, and once again it's the umbrella employees. The very employees who allow us to operate our businesses (I say this a lot don't I and yet it keeps happening).

Okay to get some substance, Orca Pay Group operates an accrued holiday pay model. In short, this means that our employees accrue their holiday pay weekly/fortnightly/monthly depending on their frequency of pay. These monies are accrued until such time that an employee either takes annual leave, at which point their leave is paid from their accrued holiday pot, or if they end their employment with Orca Pay Group. ALL ACCRUED HOLIDAY PAY IS PAID along with their last payment and subsequent P45, this is contractually guaranteed for every employee. Each week our employees get transparent accrued holiday figures on their payslip so that they know exactly how much money they have accrued (notwithstanding a full detailed explanation with supporting guidance as to why we run this model upon commencing employment with Orca Pay Group).

Prior to 6th April 2020, Orca Pay Group used to run what's known as a "rolled-up" holiday pay model, simply put holiday monies would be paid upfront to our employees each week, fortnight, etc, etc depending on the pay frequency. Our reason for moving from this model to an accrued model was due to a change (please see below) in how holiday pay should be paid and we try and pride ourselves on a cast iron compliant approach and thus this was the decision that we felt best for Orca Pay Group employees:-

"It is not acceptable for an employer to add an amount on top of a worker’s rate to take account of holiday pay. This is known as ‘rolled-up’ holiday pay. Following a Court of Justice of the European Union (CJEU) decision, this is unlawful as workers should be encouraged to take leave from work. Rolled-up holiday pay acts as an unlawful disincentive to take holiday, as a worker’s rate includes the additional top-up amount. It can also result in an underpayment of a worker’s statutory holiday entitlement".

*****whilst we have changed from a rolled-up holiday model, many umbrellas still operate rolled-up holiday pay at least ensuring they are still paying their umbrella employees their holiday pay*****

Finally, and most importantly we know that it is UNLAWFUL to keep anyone's holiday pay. It's not morally wrong, it cannot be kept by adding a clause in a contract, it is unlawful plain and simple. In no other form of employment is accrued holiday pay ever not paid to employees, so why potentially does this seem to be affecting umbrella company employees?

First and foremost, the most important part for the employee is the contract of employment. DO YOU READ THIS? Do you know the terms and conditions of how your holiday pay is being paid? Do you have to request your holiday pay by a certain date otherwise you lose it? Does it also stipulate that your actual holiday pay will then be forfeit as well?  If we are being honest, most probably don't read them, so from an advice standpoint it is imperative that you do.

The holiday period in our contract runs from January to December in each calendar year, and we clearly stipulate that ANY DAYS NOT CLAIMED DURING THE CALENDAR YEAR WILL BE LOST but at NO POINT DOES IT SAY THAT THE EMPLOYEES ACCRUED HOLIDAY PAY UP TO THAT POINT WILL BE FORFEIT AS A RESULT. On the contrary, any holiday pay that has been accrued by our employees is fully paid to them as it should be at the end of the holiday calendar and then we start again in January. We send quarterly reminders to our employees advising them of their accrued holiday leave as well as a further update on monies currently in their holiday pot, which they can cross-reference to their payslips.

This is the first area to highlight. On a recent LinkedIn post that I read, comments from an owner of one industry accreditation that whilst we are not a member of we probably respect the most, it said “our accreditation involves a requirement that umbrellas applying the accrued model write to contractors in the three months leading up to their holiday year-end.

“This is to inform them of their outstanding entitlement and advise that this must be taken by a certain date or it will be lost. We also have a requirement that any balance of holiday pay is shown on each pay statement given to workers.”

I applaud this, and it's good to see, transparency must be the key here and that responsibility lies primarily with the Umbrella Company as a responsible employer. At the same time in the same post, there was an admission that "some umbrellas" are not paying this within the industry. This unfortunately is the worst kept secret in the industry. So just how much could this be worth to those Umbrella Companies? Here's a small calculation, we have just paid someone who has left to go to permanent employment, she accrued £89 per week over 12 weeks which was £1068. She never asked for this, the only reason we knew she was going to permanent employment is that we phoned her as we noticed she hadn't been paid for 2 weeks. We advised her that we had outstanding holiday pay for her, which was paid and then issued her P45. How many contractors are in the same boat? How many don't ask? How many would forget that they were owed this holiday pay? Multiple £1068 to a thousand people, and you have £1,068,000 sitting in your bank account. Holiday pay is calculated at 12.07% so the more a umbrella employee earns the higher their accrued holiday pot, in turn meaning that the holiday pay monies being kept by these umbrella companies is gargantually bigger! Yes, employees have a responsibility to ask for it as well, but isn’t our responsibility as a responsible employer the biggest factor in ensuring we are doing things correctly, compliantly and legally and simply paying this for every employee? We payroll over a million off-payroll workers in our industry, you do the math, if just 10% of umbrella employees are not paid their holiday pay on the example we have mentioned above, this equates to £106,800,000 IN ONE YEAR (remember that poll by off-payroll.org claims that over 50% didnt receive their holiday pay). This isn't just millions of pounds, it feesible that it is 100's of millions of pounds of annually. How long have these umbrella companies been keeping these holiday monies? 5 years? 10 years? Again I leave you to do the math.

Whilst we highlight the fact that employees are losing out on their accrued holiday pay, there are also ramifications to The Treasury. Given that keeping holiday pay is unlawful, and should be paid, anyone keeping this is taking money that should otherwise be directed to HMRC and therefore The Treasury. Each holiday payment is subject to PAYE and National Insurance Contributions. How much money, therefore, is The Treasury missing out on? Does HMRC even realise this is going on? They simply cannot know.   

Earlier in the summer again allegations of £50m in "stolen" holiday pay made its way onto LinkedIn this time relating to NHS workers allegedly by one of the industries larger accreditations. Someone rightly says in one of the same posts referred to in an earlier segment of this article that more transparency is needed, and I wholeheartedly agree. So, what is the call to action? How can we collectively prohibit this from happening and ensure that those employees are paid every pound they are due?

Why is this even a question??!! Accrued holiday monies belongs to the employee, it’s their monies, how can anyone in their right mind believe it is okay to keep this? I guess we can and will only speak for how we do things at Orca Pay Group, we provide fully transparent reporting on all our holiday pay elements to every client. Each month we give them a full account of holiday pay that has been accrued by Orca Pay Group and a full account of all holiday pay that has been paid out. Indeed, we are subject to annual independent audits by 2 of our client’s part of which specifically audit's holiday pay elements, something we embrace.

As rebates get higher and higher as the competition gets fiercer, as we start to try and regain lost revenues from the COVID pandemic, and whether we want to believe it or not commercials are going to play a huge part in this (I was recently invited to tender for a piece of business where we were asked to agree to a 60% timesheet rebate, yes 60%), coffers need to be refilled after a disatrous year economically for many, many businesses, Recruitment Agencies and Businesses have to play their part, perhaps we don't want to admit that there are some that know full well that this is happening and are happy to look the other way after all rebates of that level would add very handsomely to the bottom line of a business, I would like to think and hope however that is few and far between, certainly in my experience it is. Orca Pay Group's business model is such that we charge a margin and that's what pays for everything, contractor insurances, staff costs and overheads, IT systems, marketing fees, legal costs, and any other business costs, contrary to a hearing that some believe it only costs £2-£3 to payroll someone (cheeky little nod to you buddy), the reality is it is not as cheap as everyone thinks . Therefore, we also provide a full margin report to our clients as well so that we can provide clarity, but above all so that they know their contractors, our employees are getting exactly what they should be. It is one of the reasons we're not and never will be as large as some of our competitors, why we don't and won't pay some of the rebates that are required to get on PSLs, and generally why we deal with businesses directly. Most importantly of all, we know that our employees get everything they are entitled to and that is the only reason we do what we do, its about them. Agencies and Businesses need to audit their umbrella partners more forensically than they do for all round compliance reasons, not just holiday pay. Have you actually seen the contract of employment from those umbrella companies that you use? Are you getting monthly or even quarterly reports showing what holiday pay is being accrued or what holiday pay is being paid? Are you seeing anything? Would it be fair to demand it, these contractors are also a massive part of your business and thus surely that is a responsibility you would feel many agencies would want to undertake and indeed I know many that thankfully do, but we need to do more. We are already seeing legal commencement on Agencies and Businesses who have instructed contractors to use umbrella companies who then in turn have kept their holiday pay.  

Perhaps it’s finally time to name and shame those umbrellas who have or continue to keep employees holiday pay unlawfully, we shout loud enough about naming and shaming Tax Avoidance schemes, why should this be any different, is this not worse?  With the impending off-payroll reform soon upon us don't we have a collective responsibility to advise all contractors who may well be required to have to use an umbrella company for the first time exactly what to look for when deciding which one to use, after all many, many contractors will not have a clue how an umbrella company works, let alone have any idea about what they should be looking for when it comes to holiday pay . Its difficult enough trying to explain at times to first timers if I can call them that the Employers National Insurance is a legal cost we have to pass over to HMRC and is not something umbrella companies employees charge as someone accused one of my staff the other day. These slurs and accusations cause yet more damage to the many, many Umbrella Companies who are doing things the right way, who are working hard to ensure that their employees are treated in the exact way they should be, an employee and a valued one!

Yet again this highlights the need for independent regulation, the market cannot restore confidence without one. As Martyn Valentine a Director and Solicitor of The Law Place comments in the same post responding to a comment about choosing an accredited umbrella company "Umbrella companies are unregulated, and so contractors who are unsure about this matter are advised not to take any chances, but instead secure legal advice", even accreditations don’t guarantee anything and everybody needs to stop being blindsided by them as giving a guarantee that every member is compliant. We have 7 accreditations/bodies, seriously? Tell me another industry that has or for that matter needs 7 different accreditations/bodies? This market needs a serious, serious clean up and only a true independent regulatory body can ensure this, I for one think that part of this should include a retrospective look back over the last 10 years as well enabling them to truly find the real reality of just how bad this has clearly been. We love to talk about tax avoidance schemes being the nemesis of the industry I wonder just how much the total figure would be if the industry was audited on holiday pay that has been kept over the last 10 years? I know where my estimate will be, and it ends with a £bn next to it.

As always, without the industry being regulated it somehow manages to get swept under the carpet and all the while umbrella employees miss out. When will the penny drop that these are the very lifeblood of our businesses and everyone has a line? It's beyond shameful. These umbrella companies may as well just walk into their umbrella employees bank account and empty their accounts. The crime is the same, it’s called stealing!!!