Who pays holiday? Agency or Umbrella company?

BHRitdept

Hi All,

I hope you can help out here. I have been contracting for the NHS via an Agency named Jam Contracts for a year now. My contract is always renewed every few months and in the next few months I will be taking up a permanant role with the NHS.

I use an umbrella company who pay my taxes and National Insurance contributions which I pay £20 a week for.

The law states that I am entitled to holiday pay which my Agency or Umbrella company refuse to pay me for. Who is responisible for paying for my holiday entitlement as the agency has told me that it is my Umbrella company and my umbrella company as saying it's not them and tehy wont pay me unless my agency pay.

My Agency never mentioned any form of holiday entitlement in my contract.

What can I do to try and get sorted out as both of these companies are very stubborn and I want to take action and so do 5 other contractors who work in the same department.

Thanks in advance.

Demos.

eamon

You are a self employed contractor. Therefore you pay your own hoidays, sick pay etc.

Eamon

briona

eamon wrote: »

You are a self employed contractor. Therefore you pay your own hoidays, sick pay etc.

Eamon

I'm a self-employed contractor and I accrue holiday pay through my agency, but it's minimal – I have to work approx. three weeks to accrue a day's holiday.

To the OP, I don't see how your umbrella company would be responsible as they are simply providing a service to sort out your tax and NI. You are employed by the agency, so they should be paying your holiday pay. Get some evidence to back up your legal entitlement to holiday pay, and approach the agency.

Briona

PasturesNew

Your umbrella company should have been taking money off you to put into your holiday pot, so that you could claim holiday pay, which would actually have been already paid for by you.

That is how it is supposed to work.

However, there is a chance they are still operating under the out-of-date rolled-up system, where they took your holiday pay from you then added it onto your hourly rate, so in effect your holiday pay was paid to you all along.

So, the bottom line is: neither of them owe you any holiday pay. Holiday pay is something you pay for yourself. So, you need to find out how the umbrella company were actually managing it. But they don't owe you holiday pay. Check your payslips and your accounting. See where the money's gone/follow the money trail.

For the record, if you post the name of your umbrella, there might be somebody here who does know how that umbrella accounts for the holiday pay amounts.

Zoetoes

Hi

I'm in exactly the same boat, working for the NHS through an agency as a contractor, paying £20 to the umbrella company each week which I originally thought was for sorting out paying my taxes for being self employed but when I asked for my UTR they told me I'm not self employed, I am employed by the umbrella company.

When I asked about holiday pay they told me as a contractor I don't receive any but I receive a higher hourly rate than other agencies pay etc

I don't want to cut my nose off to spite my face as the hourly rate is quite good.

I don't know what I actually pay the umbrella company for though, I also have to pay employers NI, so really they are not giving me the holiday pay in my normal pay instead of holding it back because they take about £33 a week off me in fees and employers NI.

Conor_3

ROFLMAO. I love people like you two. You use umbrella companies because you "can save money on your tax and NI" without fully understanding the ramifications. You then go blindly in without bothering to read up and pay your £20 a week without even knowing what you get for it.

What you get is NOTHING. You are paying £20 a week for them to send an invoice to the agency once a week for your wages and to do the tax paperwork WHICH YOU COULD DO YOURSELF. Even worse, because they don't tell you what expenses you can claim, YOU END UP WORSE OFF BY THOUSANDS THAN IF YOU DID IT YOURSELF.

You're not going to get holiday pay from the agency because you're not employed by the agency, your umbrella company is and it is them you need to get it from..
YES you are entitled to holiday pay from your umbrella company but good luck in getting it. The ones that actually pay it out are very few and far between.

The best part is that everyone is screwing you. The agency pay and extra £1 or £2 an hour to those using an umbrella company. It works out great for them because they save far more in the Employers NI and holiday pay they don't have to fork out. The Umbrella Company makes £20 a week out of you for doing about 5 minutes work.

Money for old rope as it's known.

My brother uses an umbrella company but unlike you two he knows how to get the best out of it. He is able to submit £100's a week in travel and subsistence expenses and things like his phone which he would not be able to claim as an employee on PAYE for the agency. This saves him about £4000 a year on his tax bill as he is in the 40% bracket and these expenses reduce it to below that and also reduce his tax bill.

Conor_3

briona wrote: »

To the OP, I don't see how your umbrella company would be responsible as they are simply providing a service to sort out your tax and NI. You are employed by the agency, so they should be paying your holiday pay. Get some evidence to back up your legal entitlement to holiday pay, and approach the agency.

Briona

You are not employed by the agency, your umbrella company is. You are not entitled to holiday pay from the agency as you're not their employee. You are an employee of the umbrella company and it is they who owe you holiday pay.

What evidence are you going to get? That you do work for the agency? Here's how the conversation would go:

Does Mr. X work for you?
No, he does do work for us but via a sub contractor, <insert name of umbrella company here>
Do you have his P45 and do you pay his PAYE and Employers NI?
No, he is employed by <insert name of umbrella company here>. They have his P45 and pay his taxes. They invoice us on a weekly basis for the hours he works. Would you like us to fax you a copy of the invoices?
No, it's OK thankyou, sorry for bothering you.

PasturesNew

Umbrella companies are used by people doing self-employed work because the alternative is to set up and run a full Ltd company of your own and invoice the agency.

The agency are not an agency like Blue Arrow or Brook Street; your agency is an entirely different sort. The agency who found the job finds CONTRACTORS. Contractors are self-employed but you have to work through your own Ltd company, that you own. So, umbrella companies provide a service to contractors, to enable them to undertake this work, by doing all your paperwork, payslips, etc for you in a form of "mock employment" so you don't have to form a Ltd company and employ a professional accountant and get caught up in all the tax returns and Corporation Tax and VAT that entails.

Think it through. You pay £20/week to the umbrella company. You earn £400/week. Holiday pay on £400/week would be about £40. Where would the £40 come from if you only paid them £20?

For the record ... you are also paying the EmploERS NI as well as your EmployEES NI.

Look again at the figures....

Umbrella companies are an easy solution for professional contractors who want the ease of appearing employed, so they don't have the hassle of setting up a Ltd company. For this you do lose a lot of IR35 flexibility and other tax advantages, but you DO get an easy solution to doing contracting, especially if it's short-term. With an umbrella company, for example, if the work stops, you get a P45 and can sign on. If you own your Ltd company you can't.

Please understand what everybody's relationship is in the work you are doing. You will see that nobody's stiffed you at all.

When I return to contracting I will be using an umbrella company. They provide a good service to people who want an easy life (I had a Ltd company before and it can be a pain if the market turns and you need to close it down).

Conor_3

PasturesNew wrote: »

Umbrella companies are used by people doing self-employed work because the alternative is to set up and run a full Ltd company of your own and invoice the agency.
.

So it costs you £40 to get an off the shelf Ltd company and the book keeping is not much more than you'd need to do as a sole trader.

PasturesNew

Conor wrote: »

So it costs you £40 to get an off the shelf Ltd company and the book keeping is not much more than you'd need to do as a sole trader.

In theory yes, but I used Business Manager Service (I think it was called) to do my stuff. And I was registered for VAT (they recommended) and there was a whole raft of IR35 issues occurring at the time. But then they messed up a tick on a box. My contract finished on 31/03 and I was trapped, no work, couldn't sign on because I had the company, they were slack, I was investigated, got a bill for £8,000 (Corp tax?), and it took 4 years to sort it all out, all the time I was thinking I owed £8k (which I didn't in the end). It kind of dragged me down at the time and clouded a lot of decisions and judgements at the time as I didn't want to start contracting while it was all going on and it was out of my control and I'd rather not repeat it.

I'd rather pay a few quid for the ease an umbrella (the right one) can bring.

Doing it yourself you have to:
- get all the paperwork right
- do your own PAYE and the forms for employer
- sort out the VAT
- sort out Corporation Tax
- insure yourself against an IR investigation
- submit all the right forms on the right dates and tick all the boxes right.

And probably some other stuff I've forgotten there.

LittleVoice

PasturesNew wrote: »

. With an umbrella company, for example, if the work stops, you get a P45 and can sign on. If you own your Ltd company you can't.

I am surprised that this should be the case. Why should owning a company affect the ability to get a P45 as a redundant employee and sign on as unemployed?