The Freelancer and Contractor Services Association (FCSA) has amended its compliance code, that would have prevented umbrella companies from keeping unused contractor holiday pay.
As of 1 July, the FCSA had planned to add a clause stating forbidding member firms from keeping unused holiday pay for themselves.
Section A10 (d) of its code of compliance for umbrella companies was going to be updated to say: “Save for any holiday entitlement which is carried over…you must not retain any accrued holiday pay beyond the end of the relevant holiday year.”
However, it was instead amended to: “[You] confirm that you make reasonable effort to ensure that employees receive their full holiday entitlement each holiday year.”
According to the FCSA, under the Working Time Regulations 1998 (WTR) an employee may only be paid in lieu of their holiday entitlement if they have accrued holiday outstanding on termination of their employment. It is not lawful to pay an employee in lieu of their statutory holiday entitlement while their employment is continuing, and in rare cases can result in losing holiday entitlement.
Chris Bryce, chief executive at the FCSA, said: “The rationale for this is that the WTR are effectively a piece of health and safety legislation; the purpose of allowing an employee to take paid holiday is to ensure that they have a period of rest and relaxation away from work. If an employee receives a lump sum payment instead of taking their holiday, then they forego that period of rest and relaxation which could be detrimental to their health.
“FCSA believes that the WTR are outdated and should be amended to recognise modern working practices and allow umbrella companies to make payments in lieu of unused holiday entitlements. FCSA is lobbying government to introduce those changes. Our advice to all employees is to make use of their full holiday entitlement, to take the time off they’re entitled to rest and recuperate.”
