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Latest Umbrella Holiday Pay Rip Off: Evidence Published

Our friends over at Contractor Voice have published a body of evidence which confirms that one of the UK’s largest umbrella companies, Workwell (previously JSA Group), has deliberately withheld holiday pay from one of their umbrella contractors.

In this instance, the contractor has had £2865.50 withheld and has written to JSA several times seeking for this amount to be paid to him.  The evidence illustrates the arguments that the contractor put to JSA*, namely that:

  1. The engagement email (that the contractor received when he joined JSA’s umbrella in 2020) does not mention loss of holiday pay;
  2. The “Working with JSA Guide” (that the contractor received when he joined JSA’s umbrella) does not mention loss of holiday pay;
  3. He was not contacted in September 2020 when the loss of holiday pay was imminent;
  4. Payslips from period 27 onwards (i.e. after the end of the holiday year) continued to show a holiday accrual which JSA say is not available.

JSA’s response to the contractor is that “there is no entitlement, contractual or otherwise, to receive a payment instead of taking annual leave” and that there is no right to carry over holiday entitlement from one holiday year to another.

Losing holiday pay in this way is particularly galling given that the company hiring the worker has paid for their holiday entitlement as part of the agreed rate for that workers’ services.

Hence some commentators describe this practice as theft – because the holiday pay has been given to the umbrella on the understanding that it will be duly passed on to the worker!

Recent developments

A holiday pay tribunal has concluded that the right to paid holiday does not lapse but carries over and accumulates until termination of the contract, at which point the worker is entitled to a payment in respect of untaken leave.  Whilst this decision relates to a specific case (Smith vs Pimlico Plumbers), if this judgement is applied widely it could mean that contractors have a case for receiving backdated holiday pay.

JSA purport themselves to be compliant by virtue of being an accredited member of the Freelancer & Contractor Services Association (FCSA), which means they are tested annually to ensure they adhere to FCSA’s requirements for umbrella companies.

Following the holiday pay tribunal, a group of MPs has written to the FCSA to request clarification regarding whether any of their members have previously withheld holiday pay from workers, and if under the terms of the latest ruling any workers engaged by FCSA members would be entitled to backdated holiday pay.

Wider implications

As already outlined, the contractors’ holiday pay has been included in the assignment rate paid by the end-client that the contractor works for.  So in the event that a contractor doesn’t claim their rightfully owed holiday pay, surely the unclaimed amount should be offered back to the company that paid it to the umbrella?  Furthermore, when accrued holiday is paid to a worker it is subject to PAYE and NICs, so any company retaining holiday from their workers is preventing this income from being properly taxed.  The money might be subject to corporation tax by the company retaining it (depending on the company’s year-end financial position), but the Exchequer will not have received the intended PAYE and NICs.

Contractors must be paid what they are due

There are many umbrellas within the sector who have taken the moral decision to always pay holiday to their contractors, and yet a behemoth such as JSA does not appear to feel the same obligation.   It seems to us wholly unfair that a sector is tarnished by such profiteering.

However, the most important point is that contractors are not receiving monies due to them, which is fundamentally wrong and this practice must stop.

 

*JSA have recently rebranded to Workwell.  For the purposes of this article we refer to JSA which was the company name at the time that this contractor’s holiday pay was retained.

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