3 Key Statutory Pay Benefits Through an Umbrella Company
When you’re working through an umbrella company, you benefit from full employee status. It essentially bridges the gap between regular employment and contracting. And a key part of that is your statutory rights – including statutory payments.
Holiday pay, sick pay and maternity (or paternity) pay are all available through umbrella companies, which is why we – at Umbrella Broker – know all about them. Fortunately, we’re keen to share that knowledge. Keep reading to find out more about umbrella company statutory payments.
Umbrella company holiday pay
We’ll start with holiday pay because, let’s face it, it’s the one we’re all guaranteed to use. Pay-as-you-earn employees are entitled to 5.6 weeks’ worth of paid holiday every year. That includes umbrella company employees, whose income is processed through pay-as-you-earn, and translates to the following:
- 5 days or more worked each week – 28 days’ holiday per year
- 4 days a week – 22.4 days’ holiday
- 3 days a week – 16.8 days’ holiday
- 3 days a week – 16.8 days’ holiday
- 3 days a week – 16.8 days’ holiday
This could be a calendar year or a year starting at the time your contract begins. Generally, you can choose when you take your holidays. However, your employer – in this case your umbrella company – may require you to take some at specific times like bank holidays.
As for how much, holiday pay is the same rate as your usual basic pay. This is the amount you receive from the umbrella company as your employer, not the daily rate you charge clients. So, if you earn £200 a day through your umbrella company, this is exactly what you’ll receive during your time off work.
As a contractor, it’s likely your hours will vary on different contracts or even just different days. In this case, your holiday pay will be calculated as an average based on the 12 weeks prior to your holiday. Let’s say you spent 4 weeks on £800 a week, 4 on £500 and 4 on £1,200, your holiday pay would be calculated as follows:
- 4 x £800 = £3,200
- 4 x £500 = £2,000
- 4 x £1,250 = £5,000
- £3,200 + £2,000 + £5,000 = £10,200
- £10,200 ÷ 12 = £850 per week
Umbrella company maternity pay
Despite some common misconceptions, maternity pay is a statutory right regardless of how long you’ve worked for your employer, how much you earn or how many hours you work. The amount you’re entitled to is based on how much you earn and is calculated as follows:
- First 6 weeks – you will receive 90% of your average weekly pay
- Following 33 weeks – you will receive either 90% of your average pay or £145.18 a week (whichever is lowest)
That makes a total of 39 weeks paid maternity leave, which is subject to tax and national insurance contributions.
While the period of leave for holiday pay is self-explanatory, maternity pay and leave is a bit trickier. Understandably, you can’t receive maternity pay while you’re still working. However, you must also wait until you’re within 11 weeks of the due date before beginning maternity leave and maternity pay.
Don’t worry. You don’t have to take the full 39 weeks off work either. £145.18 a week simply isn’t enough income for some contractors. Instead, your maternity leave and maternity pay ends as soon as you go back to work.
As opposed to the 12-week average period for holiday pay, maternity pay for varied week-to-week income is calculated using an 8-week average. Specifically, it is based on the 8 weeks before the “qualifying week”, which is 15 weeks before the due date.
Umbrella company paternity pay
For male contractors, paternity leave is available following the birth of their child. They can take 1 or 2 weeks’ leave with £145.18 or 90% of their average weekly pay (whichever is lowest). Unlike maternity leave, this can’t start before the birth. Instead, the paternity leave and pay must end within 56 days of the birth.
Umbrella company sick pay
As with other types of statutory pay, statutory sick pay is available through umbrella companies because contractors are classed as full employees. It amounts to £92.05 per week and is available for up to 28 weeks. Once 56 days have passed since the initial sickness period has ended, employees are entitled to another 28-week maximum sickness period.
Sick pay requires 4 consecutive days of sickness off work in a row. This includes non-working days, so if you work Monday to Friday and you’re too ill to work from Friday to Monday, you are eligible for sick pay. However, sick pay will only be paid for the days you would have been in work, known as ‘qualifying days’. Also, the first three days of illness are not eligible for payment.
To claim sick pay from your umbrella company, contractors must tell them within 7 days or by their own specific deadline if it’s outlined in their contract. You will need a sick note (also known as a ‘fit note’ because they declare whether an employee is fit to work) if the absence is 7 or more consecutive days.
Other benefits of umbrella companies
As well as statutory pay for maternity, sickness and holidays, umbrella companies provide contractors with a pension scheme and access to childcare vouchers. But not all umbrella companies are the same. And it’s important to find the right fit for you.
Umbrella Broker helps contractors do exactly that with a fast, hassle-free online comparison tool. Compare up to ten umbrella companies in a matter of minutes to find the best employer for you. Any questions? Feel free to get in touch with our support team.
