Contractors that choose to operate through an umbrella company will benefit from being classified as an employee. This means that umbrella contractors receive statutory rights, including holiday pay, sick pay, and maternity or paternity pay.

Whether you’re looking to brush up on your umbrella statutory rights or are new to contracting and are deciding whether an umbrella company is the best option for you, in this guide, Umbrella Broker explains what statutory rights are available to umbrella contractors and how this will impact you.

Umbrella company holiday pay

The first statutory benefit that umbrella contractors are entitled to is holiday pay.

This is good news for contractors who work hard and deserve a well-earned break from time to time.

As umbrella contractors are PAYE (pay-as-you-earn) employees of the umbrella company, they are therefore entitled to the statutory amount of paid holiday each year which stands at 5.6 weeks for full-time employees.

Contractors that work part-time are entitled to the following:

• 4 days per week – 22.4 days
• 3 days per week – 16.8 days

In terms of how much holiday pay contractors will receive, holiday pay is set at your basic pay level, meaning the amount you are paid by the umbrella company and not the rate you charge the client.

If, like many other contractors, you work varying hours or days on projects, then your holiday pay will be worked out by looking at the 12 weeks prior to your holiday and will be calculated as the average based on this time period.

Umbrella company sick pay

As umbrella company employees, contractors are also entitled to umbrella company sick pay. Currently, statutory sick pay is set at £95.85 per week.

This is seen as a big advantage to many contractors, offering them an extra level of security and a safety net should they need to unexpectedly take time off the project due to illness.

Every full-time employee in the UK can claim statutory sick pay, which is paid by the employer for up to 28 weeks per year.

In order to qualify for sick pay, UK workers must:

• Be an employee
• Earn £120 per week on average before tax and National Insurance deductions. If you work varying hours, this will be calculated over an 8-week time frame.
• The contractor must have been ill for 4 days in a row, which includes the weekend. However, you will only receive sick pay for the days you would have been working. So, if you have been ill from Friday-Monday and you don’t usually work weekends, you will only receive pay for Friday and Monday, which are otherwise known as qualifying days.

You will not receive umbrella sick pay, however, if you are already getting statutory maternity/paternity pay or you have exceeded the maximum of 28 weeks’ worth of sick pay.

If you are ill, you must notify the umbrella company within 7 days. If your illness lasts longer than 7 days then you will need to get a sick note from your doctor.

Umbrella company maternity pay

Umbrella company contractors will also benefit from receiving statutory maternity pay.

In the UK, workers that take maternity leave currently get 90% of their average weekly pay for the first 6 weeks. Following this, for the next 33 weeks they will receive 90% of their average pay per week or £151.20 depending on which is the lower amount. 

This means that contractors can receive 39 weeks of paid maternity leave overall, offering great peace of mind and security that you will still be paid during this time. However, if you choose to go back to work before 39 weeks you can end your maternity leave early.

Contractors must wait until they are within 11 weeks of their due date before they start to take their maternity leave and only qualify for maternity pay in this time.

How much maternity pay you will receive is calculated on an 8-week average rather than the 12-week average used for holiday pay.

Umbrella company paternity pay

As well as maternity pay, contractors are also entitled to paid paternity leave.

Paternity leave is available after the child has been born. Contractors can take 1-2 weeks’ paid leave. Again, this is at a rate of 90% of your average weekly pay, or £151.20 per week, depending on which of these is lower.

Umbrella company workplace pension

Finally, umbrella company contractors are also entitled to a workplace pension. This is because they are full employees of the umbrella company, so, granted that they meet the following criteria, they will be entitled to a workplace pension:

• They must be between the ages of 22 and state pension age
• They must earn a minimum of £10,000 each year
• They must work in the UK

Next steps – find the best umbrella company with Umbrella Broker

Not only do umbrella company contractors receive statutory benefits, from holiday pay, sick pay, maternity and paternity pay and a workplace pension, but they also receive a wide range of other benefits offered by umbrella companies.

For example, umbrella companies give contractors a salary, work out and deduct their tax and National Insurance through the PAYE system, make contractors exempt from dreaded IR35, cover contractors with basic levels of insurance and offer help with things like childcare vouchers.