Rolledup Holiday Pay

Dear Experts

Hi, I am a learning support assistant, working through Protocol Education and get paid through an Umbrella Company. Is it still possible for an umbrella company to use rolled up holiday?

This company is based in Scotland and I believe this was never lawful in Scotland. My wageslip says 12.08% of my daily rate is an advanced hol pay. My problem is that they deduct expenses from the whole of my daily rate,not just from the actual wage.

How is it possible to claim lunch,travel etc while "on holiday"? If this is unlawful an idea who can I complain to (apart from the company itself)?

Many thanks.

Paul

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Hi Paul

In answer to your question, there was a difference of opinion between the English and Scottish courts over whether holiday pay could be paid out to employees/workers rolled up (English courts said yes, Scottish courts said no) - the issue went to the European Court of Justice who essentially decided that paying rolled up holiday pay would be "ok" providing:

1. The employee/worker agreed.

2. The amount of holiday pay is a genuine and true addition to salary.

3. The amount of holiday pay was clear and transparent to the employee/worker.

As Scotland is part of the EU it is bound by the same judgement, so providing there is an agreement between you and your umbrella company to pay rolled up holiday pay (usually within the contract of employment), and the amount of holiday pay (12.07%) is identified separately on your payslip and equates to 12.07% on top of your salaried pay (the pay subject to tax and NI) then it should not be unlawful.

The way the umbrella company calculation should work, so that you can check it, is:

The umbrella company receives money from its clients for the services provided by you on their behalf, for example if your charge out rate is £10 per hour and you have worked 40 hours the umbrella will invoice its client for £400.

It is important to remember at this point the £10 per hour is the umbrella company's charge out rate NOT your hourly rate.

Of the £400 received the umbrella company must pay you National Minimum Wage, plus rolled up holiday pay (if paying out rolled up holiday pay rather than accruing it) at 12.07% on top of National Minimum Wage.

Eg 40 hours at £5.93 plus 12.07%. So under this example your basic pay would be £237.20 plus £28.63.

Of the £400 received by the umbrella company they deduct your basic salary, account for company overheads of Ers NI etc and their fee and then pay you out any travel expenses you have incurred.

If there is any money left over after this they will calculate a top up salary & holiday pay element, accounting for company overheads and pay this out to you.

So for example if the umbrella company's fee is £15 per week and you have incurred £100 of expenses a rough calculation would work as follows:

Money received by Umbrella Company      = £400.00

Employee basic salary - £237.20
Employee holiday pay on top - £ 28.63

Total remaining = £134.17

Company Margin - £ 15.00
Employers NI - £ 17.92

New remaining total =£101.25

Employee expenses - £100.00

New remaining total in company =£ 1.25

Employee top up - £ 0.98
Additional Holiday pay - £ 0.12
Employers NI - £ 0.15

Total remaining in company £ 0.00


So the employee should see this information on their payslip:

Gross salary £238.18
Holiday Pay £ 28.75
Expenses £100.00

Obviously salary and holiday pay are subject to tax & National Insurance and it is entirely up to the umbrella company whether they show the umbrella company overheads & margin.

As long as you are being paid National Minimum Wage for every hour worked, plus holiday pay on top and are only being reimbursed expenses you have confirmed you have incurred in the performance of your duties then you should have no problems yourself.

There are obviously a great many more things to consider generally for umbrella companies and a host of legislation outside of your question (but I'm conscious I have rambled enough for now!)

David Harmer, Director, MarbleCC