FCSA changes umbrella compliance code for holiday pay

08 July 2022

The Freelancer and Contractor Services Association (FCSA) has changed its code of conduct regarding keeping unused holiday pay for umbrella companies.

Originally the planned update to the compliance code was to forbid member firms from keeping unused holiday pay. The code of conduct was initially going to be updated to say "you must not retain any accrued holiday pay beyond the end of the relevant holiday year." In effect, this would only leave the option to pay lieu of holiday at the end of the year for those who didn't book it.

Legal advisers higlighted that this clause could require firms to act unlawfully, as paying holiday in lieu is only permitted for leavers. It is not permitted by law (Working Time Regulations 1998) to pay workers with ongoing contracts holiday in lieu, as this could discourage them from taking time away from work.

The code of conduct now states instead that firms should confirm that they "make reasonable effort to ensure that employees receive their full holiday entitlement". If contractors or any worker decides not to book annual leave, after reasonable effort has been made to encourage them to book the leave and use their entitlement, they could end up losing some of it. 

Chris Bryce, FCSA's chief executive, said:
“FCSA believes that the WTR are outdated and should be amended to recognise modern working practices and allow umbrella companies to make payments in lieu of unused holiday entitlements.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.”

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