Rolled-up holiday pay could become the norm for umbrella company contractors

The government has hinted at plans to legalise rolled-up holiday pay as part of its vision for smarter regulation post-Brexit. 

If given the go-ahead, umbrella contractors would receive holiday pay on top of their normal hourly pay, rather than receiving the payment during their time off. 

Typically, this is calculated at the rate of 12.07% so that it equates to the annual statutory entitlement of 5.6 weeks holiday.

For example, if you are paid the national living wage which is currently £10.42 an hour, then you would receive an extra £1.26 as rolled-up holiday pay for each hour worked. 

While we are still awaiting confirmation of dates and further details, the following information was shared in a recent government policy paper: 

“[The reform will help towards] reducing the administrative burden and complexity of calculating holiday pay. We propose introducing rolled-up holiday pay, so that workers can receive their holiday pay with every payslip, and merging the current two separate leave entitlements into one pot of statutory annual leave, while maintaining the same amount of statutory leave entitlement overall.” 

Why is rolled-up pay currently unlawful? 

In 2006 rolled-up pay was made illegal and courts ruled that holiday pay must be dispenced only at the time of the individual’s leave. 

While some agree this was the right decision, as it means employees are more obliged/likely to take time off – others think rolled-up pay is more beneficial (especially for contractors) as it means dodgy umbrellas will have to choice but to give their employees the holiday pay they are entitled to.  

Why now? 

Following the UK’s departure from the EU, the government has said it’s looking to reform and remove “out-of-date, unworkable and unnecessary EU laws”.

Since rolled-up pay was made illegal under a European Court decision, it is now up for debate as to whether it is still necessary. 

Keep an eye on our blog for the latest developments on this story. 

In the meantime, drop our team an email via [email protected] to get started on your umbrella contracting journey!

Mint Umbrella is Professional Passport approved and we are always happy to help with any queries you may have. Get in touch today!