Contractors’ Questions: Can my umbrella take unclaimed deducted holiday pay?

Contractor’s Question: I’ve read about umbrella companies and holiday deductions but where do I stand if I did not ask the umbrella to pay me back deducted holiday pay before the end of the FY 2014/15, and they simply took it themselves, without warning?

The umbrella swallowed more than £1,200 of deducted holiday pay, which they claim I lost because it should have been claimed at the end of FY 2014-15. This is stated in my contract with them. But even if there is such a clause, can they really just take the money?

Expert’s Answer: On the assumption that you are an employee of the umbrella company and that you are paid PAYE, then like any employee, the entitlement to holiday is usually on the basis that it is taken during the employer’s holiday year.

Holiday accrued but not yet taken cannot be carried over to the next holiday year, unless the reason it is not taken is because you have been on sick, maternity, adoption or shared parental leave. You have not indicated that any of the aforementioned statutory rights to leave applies.

The umbrella company has clearly stated in their contract that you must claim your holiday pay before the end of the holiday year. Therefore, if you do not take the leave or claim holiday pay before the deadline, this is the same as having accrued holiday but not actually taking it. It follows that, if you did not claim the deducted holiday pay before the end of the holiday year in question, that is 31st March 2015, you have waived your right to do so.

Under the Working Time Regulations 1998 an employer is only allowed to pay in lieu of holiday days accrued but not yet taken upon termination of the employment contract. It appears as if your employment contract with the umbrella company is currently in force and you are therefore not entitled to be paid in lieu of holiday accrued during the 2014/2015 holiday year. Hence, I hope you have ensured that you have ‘taken’ your accrued holiday days before the end of this holiday year, that is, before 31st March 2016.

The expert was Sofie Lyeklint, legal consultant at Lawspeed Limited.

Thursday 16th June 2016