One of the drawbacks of being self-employed is the lack of employee benefits, like sick pay and holiday pay. However, some self-employed people are entitled to self-employed holiday pay if they’re classed as workers or employees, which may be the case if they have a contract to do work personally, or work through an agency or umbrella company.
Who is entitled to holiday pay?
Employees – all UK employees are entitled to at least 28 days of paid holiday including bank holidays.
Workers – unlike self-employed people who are contracted to provide services for a customer or client, workers are people contracted to do work personally for a company. The contract will determine employment status.
Contractors – if you are contracting a self-employed person through an agency or umbrella company, then they are an employee of the agency or umbrella company and can get self-employed holiday pay (funded out of the contractor’s pay in the case of umbrella companies and fees in the case of agencies).
What is the holiday pay entitlement?
Anyone falling into the above categories is entitled to a minimum of 5.6 weeks’ holiday entitlement, the equivalent of at least 28 days paid leave for a full-time employee, based on a standard 5-day working week.
How do you calculate holiday pay entitlement?
Calculating self-employed holiday pay isn’t straightforward, and there have been some recent high profile cases of businesses getting this very wrong and ending up finding themselves in court!
Previously, for some workers with no fixed hours, holiday pay was worked out using the worker’s average pay from the previous 52 weeks (only counting weeks in which they were paid). However, for leave years starting on or after 1st April 2024, a new method using 12.07% of total pay in a pay period is used to calculate holiday accrual and pay for irregular hours and part year workers (based on 5.6 weeks divided by the 46.4 weeks left over in the year). Agencies and umbrella companies will also calculate holiday pay at 12.07% of the hourly rate.
If this all sounds complicated and confusing, why not outsource your payroll to us here at Payroll Junction? We’ll ensure that your employees’ holiday pay is worked out accurately so that you’re always on the right side of the law. Get a quote today!