FCSA to fix 'woolly wording' on holiday pay, as it investigates 'morally indefensible' JSA Group

The Freelancer & Contractor Services Association will tighten up “woolly” wording in its member code, should a loophole let their umbrella companies pocket contractor holiday pay.

The statement of intent from the FCSA’s Chris Bryce to ContractorUK, follows an upload of documents appearing to show FCSA co-founder JSA keeping holiday pay of £2,865 for itself.

Formally rebranded from JSA Group to Workwell exactly 24 hours before the upload, a spokesperson for JSA said it “refutes any suggestion of wrongdoing”.

'Gap in FCSA code'

The company’s fuller response to ContractorUK is published separately today, here.

But Mr Bryce has since launched an FCSA investigation into JSA/Workwell.

The investigation is expected to conclude by the end of March 2021, at the very earliest.

Yet posting on ContractorUK, Mr Bryce said his CEO predecessor at the FCSA had already closed the potential holiday pay “gap” in the association’s code (specifically Articles 9-10).

'Wording still woolly'

And potentially significantly, the current FCSA boss says that this closing occurred some 10 months subsequent to the alleged withholding of holiday pay by JSA/Workwell.

My predecessor [Phil Pluck] reviewed and revised the codes in October 2021, [whereas the upload relates to the experience of a JSA employee in December 2020].

“[However] if the wording is still woolly,” continued Mr Bryce in a post on the forum of ContractorUK, “then I’ll make it more clear.” 

'Use it or lose it on holiday pay is unacceptable'

Asked last night when to expect the potential clarification, the association’s CEO did not specify.

But he has now decided, it seems, that the ‘woolly words’ in the FCSA’s code do need fixing.

“[We] will clarify the October 2021 wording in our codes on holiday pay in due course,” Mr Bryce told ContractorUK in a statement.

“But my earlier statement [made at the time of the JSA-related documents upload] should be fully understood by all – ‘use it or lose it’ [on holiday pay] is not acceptable.”

'Acted within FCSA code at all times'

Should the FCSA code be revised to put beyond interpretation that holiday pay cannot be pocketed, the code would still only be voluntary.

And the code lacks the force of law.

In their statement today on its alleged withholding of holiday pay, JSA/Workwell says that as an FCSA umbrella company, they “acted within the FCSA code at all times.”

'One wonders how contractors might feel'

An ex-solicitor with 20 years’ experience at drafting similar codes but also contractual; legally-binding documents including for umbrellas, couldn’t sound more unimpressed.

“Workwell, or JSA as they were branded at the time, claims to have ‘acted within the FCSA code at all times’, if that is true, what, I wonder, does that say about the FCSA code?”

“Furthermore,” continued the former solicitor, “if it is true that an umbrella company has retained money from income generated by the worker/contractor, on account of holiday pay.

“And then, for whatever excuse, refused to pay that money to the worker, and instead claimed to be entitled to retain it, one wonders how contractors might feel about using that umbrella.”

'Rife -- at JSA and other umbrellas'

The uploaded documents purportedly show a JSA “Compliance Coordinator” telling the out-of-pocket contractor that he has “no entitlement, contractual or otherwise, to receive a payment instead of…taking annual leave.” 

But at odds with the ex-solicitor, who for simplicity’s sake was referring to just a single umbrella company, the withholding of holiday pay by umbrellas is endemic.

“We imagine that this is rife. Not only at JSA, but also at other umbrella companies with the same attitude,” says Rebecca Seeley Harris of the Fair Umbrella campaign.

'Finally people twigging at the huge profits made from this'

Similarly suggesting the issue to be huge, Julia Kermode of IWORK who blogged about the allegations against JSA, says she received the backing of a mid-sized umbrella company .

“This well-known umbrella company said they were glad [at my blog] for making people finally ‘twig’ that this holiday pay abuse is a thing. It has to stop, the company told me.

“The company also said they were many brollies operating compliantly, doing everything ethically, only for the bigger brollies to make huge profits from this sort of thing.”

'Nice little agency-brolly income-generator'

Having intimate knowledge of the FCSA, given she was its chief executive immediately before Mr Pluck, Ms Kermode further revealed to ContractorUK:

“In the worse cases of holiday pay not being paid, umbrellas and recruitment agencies split the retained funds between them, as a nice little income-generator!

“I have no hard evidence of this, only anecdotal evidence but it’s from a few different sources. But to be clear, I’m not saying this is the case in the instance of JSA/Workwell.”

'Repugnant'

ReLegal Consulting, a law firm run by Ms Seeley Harris confirmed that “not all umbrellas abuse the system”.

“If the [uploaded] emails are taken on face value, then JSA/Workwell are technically not doing anything illegal -- however repugnant their actions appear to be,” the firm told ContractorUK.

“And this is the problem. They are taking advantage of the fact that holiday pay is a health and safety issue and there is no entitlement to carry it forward at the end of the holiday year and, as we know, paying rolled up holiday pay is illegal.”

'The specifically and transparently test of the Pimlico case'

Fortunately for contractors (who understandably want the holiday money an end-client has paid out for them), the so-called ‘Pimlico Plumbers case’ has redefined how legislation should be interpreted.

In February 2022, the Court of Appeal held that employers cannot deprive a worker of unpaid holiday pay, unless it can show that it “specifically and transparently” gave the worker the opportunity to take paid annual leave, encouraged the worker to take paid annual leave, and informed the worker that the right would be lost at the end of the leave year.

ReLegal Consulting says the Single Enforcement Body which may be fleshed out at Wednesday’s Spring Statement 2022, should bring umbrella holiday pay practice “in line with Pimlico.”

'The problem will go away'

Yet another legal expert Roger Sinclair of Egos Legal Limited believes that some of the disquiet around brollies is of their own making.

And the expert further suggests that fixes to the problem don’t necessarily need to be complicated, nor even involve revisions to codes of practice; let along the formation of a new government body.

“Surely all the umbrella has to do is to pay, or advance, the paid leave entitlement that this worker has earned, and the problem will go away?” began Mr Sinclair.

'Besmirches the image of the entire umbrella industry'

He added: “Of course, the umbrella industry is based on trust – trust that money received from the agency / client will be applied towards paying the worker, employment overheads, and that the umbrella will retain no more than its agreed margin.

“An umbrella company which breaches that trust besmirches the image of the entire industry. If the [JSA] contractor featured [in the uploaded documents] were to contact me, I’d happily advise.”

But without widely-sought regulation, the umbrella industry uses ‘badges’ to try to reinforce that trust, or communicate to others they are ‘trusted,’ on holiday pay and other issues.

'Morally indefensible'

Compliance group Professional Passport says it would not grant its own stamp of approval to a brolly that both keeps hold of holiday pay -- and keeps quiet to the pay’s rightful recipients.

“Any employer withholding holiday pay and not communicating clearly with workers is morally indefensible and something that….[our] accreditation would never support,” the group said.

In a statement, Professional Passport CEO Crawford Temple added that traditionally, umbrella providers “relied on” workers “often” not reading contractual terms permitting holiday pay entitlement to be sacrificed towards the providers’ profits.

'Signifcant back-claims'

“The majority of employers, not just umbrella companies, have contractual terms that create a ‘holiday year’ and require all entitlement to be taken within that year or it is lost.

“What the latest ruling on Pimlico Plumbers has done is to make clear that employers must be proactive with their employees and encourage them to use their holiday.”

Mr Temple continued in a statement to ContractorUK: “Providers who have simply relied on their contractual terms and remained silent with their employees could find themselves facing significant back-claims on holiday pay. Looking forward, this should also help to limit those providers seeking to profit unfairly from the holiday pay retention.”

'What is lawful different to what is morally correct'

And until either Pimlico-induced claims or the SEB emerge, for out-of-pocket contractors it is indeed unfortunately ‘unfairness’ rather than ‘unlawfulness’ that they are up against.

“As with any things in the umbrella industry what is lawful and what is morally correct do not always sit alongside each other,” Clarity Umbrella managing director Lucy Smith told ContractorUK.

She added last night: “Just as it is with any employer, a brolly has a right to not allow an employee to carry over holiday to the next year. So it is very much dependent on what the contract states.

“But in my eyes, the holiday pay is always the contractors and should always be repaid at the end of the umbrella’s holiday year, retaining it is simply taking hard-earned money from the contractors and should be stopped. Let’s hope regulation at Spring Statement 2022 will consider holiday pay as part of the SEB’s remit.”

'As soon as we learned; we asked'

Also speaking yesterday evening, Mr Bryce declined to be drawn on whether the Single Enforcement Body, or the courts (on the back of Pimlico case), would dictate the future of holiday pay, rather than any FCSA code revisions.

But he indicated there was no delay between the emergence of the uploaded documents concerning JSA – made by portal Contractor Voice on March 10th, and the launch of the FCSA’s investigation – reported by Recruiter on March 16th.

Mr Bryce told ContractorUK: “FCSA asked JSA to provide us with information regarding the allegations…[about its treatment of holiday pay] as soon as we learned of them.”

He also said: “We will have comment on the outcome of those investigations when they are concluded.”

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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