Pimlico Plumbers has been in the news again recently when a former employee, Gary Smith, won his landmark case to recover compensation for the unpaid leave he took during his 6-year engagement.
In this article, we explain how this ruling affects both umbrella companies and contractors.
Umbrella companies have two main ways of paying holiday pay, one by accruing the holiday pay to be paid as a lump sum on the contractor’s request, and the other, the rolled-up method, which is where the holiday pay is included in their monthly payslip.
The accruing method has always been subject to harsh criticism. A recent investigation by the BBC found that the contractors were often never getting the holiday pay they were entitled to, due to a requirement that stated the contractor must request the holiday pay before the end of the year or lose the money. This meant that unpaid leave doesn’t get carried over to the end of the year, leaving umbrella companies with extra cash on the books. Dishonest umbrella companies were often known to keep the pay for themselves or split it with agencies. This is all a bit of a grey area, until now this has been legally allowable but yet another morally corrupt practice of dubious umbrellas.
Further complicating matters are the recent changes to IR35, which requires employers or end hirers to determine the employment status of all contractors to prevent “hidden” employment. Those deemed inside IR35 are entitled to the same rights and benefits as employees, including holiday pay.
In the case of Gary Smith, he was deemed an employee in a previous case and therefore entitled to holiday pay. But the result of this latest case has meant that he is now able to backdate his claim. As part of the ruling, the courts overturned the usual requirement for contractors to request the pay within the year the holiday was taken and said that Smith was entitled to the full amount of backdated holiday pay.
This latest case has changed everything as it now makes it clear that employers have a responsibility to inform their workers that they are entitled to full holiday pay. If employers fail to make their employees aware of this, then the employee does not lose their entitlement at the end of the year, instead it begins to accumulate. This is also true of anyone who has recently left the employment of an umbrella company, these individuals are also entitled to claim for their holiday pay.
Although this ruling has yet to be made law, it does represent an important landmark as we step closer towards the much-needed regulation of umbrella companies.
We at JMK are proud to say that we have always, and will continue to, pay out 100% of holiday pay. We always inform our workers of their holiday pay entitlement, and we ensure that it all goes to them. We welcome this ruling as we continue to support contractor’s rights.
Talk to us today if you need any further clarification on your rights to holiday pay.
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