The government has announced a consultation process on their plans to fully legalise rolled-up holiday pay, making it easier for umbrella company workers to know how much they’ll be paid.  

The proposal to fully legalise rolled-up holiday pay was cautiously welcomed by contractor interest groups and umbrella companies like Umbrella.co.uk. 

What is rolled-up holiday pay?

Rolled-up holiday pay is where employers top up a worker’s normal hourly pay to account for holiday pay.

Instead of getting holiday pay when they take leave, workers usually get an additional 12.07% on top of their normal pay packet. This figure represents the legal minimum of 5.6 weeks of holiday each year.

In 2006, a European Court said that rolled-up holiday pay was unlawful because it violated European Working Time regulations.

Despite this, rolled-up holiday pay is still the norm in many industries. Many umbrella companies, for example, have tried to circumvent the law by asking workers whether they want to receive rolled-up holiday pay. 

Benefits for umbrella company workers

Getting rolled-up holiday pay has benefits and drawbacks for umbrella workers. The key benefit is an inflated pay packet, while the main drawback is that workers aren’t paid if they take annual leave. 

On balance, many umbrella company workers prefer rolled-up holiday pay, especially if they are only engaged in short-term temporary projects and won’t take much annual leave.

One big problem in the industry is that some dodgy umbrella companies have been keeping unclaimed holiday pay that should have gone to employees. 

This problem is made worse because many temporary workers don’t know that they are eligible to claim holiday pay, which can lead to significant lost income. 

This government policy shift aims to stop this from happening by making the rules crystal clear for umbrella companies and their workers. 

The change means that some umbrella workers could see their annual pay increase by thousands of pounds. 

Miles Grady, Director of Umbrella.co.uk said:

“Rolled-up holiday pay will have a significant impact on the UK’s temporary workers, making the system fairer and providing more financial security. It’s good news for anyone that’s worked with an unscrupulous umbrella company or recruitment agency. 

“This announcement is a step in the right direction, but the sector needs more details about how and when rolled-up holiday pay will be legalised.”

For more information about working through an umbrella company, speak to a member of the team today. Call: 01625 544 460.