FCSA waters down umbrella company code and settles for ‘reasonable effort’ on contractor paid leave

The FCSA has erased proposed words for its new compliance code that would have prohibited umbrella companies from keeping unused contractor paid leave, after a member made legal threats.

As of Saturday July 1, 2022, the FCSA was going to add a new clause to its code in order to make it beyond doubt for member companies that it was forbidden to keep unused holiday pay for themselves.

In fact, ContractorUK understands that section A10(d) should state: “Except for any holiday entitlement which is carried over…you must not hold back any holiday pay accrued beyond the end of the relevant holiday year. »

“Serious problem”

But a company member of the Freelancer & Contractor Services Association (FCSA) strongly opposed, “clearly because they had a serious problem” with the ban on paid leave for contractors.

Also according to a source, these objections from the FCSA member firm were accompanied by threats of legal action against the FCSA.

Potentially unenthusiastic about a potentially long and costly legal case with one of its own members, the FCSA stifled the proposed wording (“shall not withhold”) before it saw the light of day.

“Make reasonable efforts”

Instead, A10(d) of the FCSA Compliance Code for Apex Companies now states:

“[You] confirm that you make reasonable efforts to ensure that employees receive their full leave each vacation year.

Although a little taken aback, the source is aware of the main difference: “The previous version suggests contractor leave pay “must” be carried forward and not lost.

“But the latest version – now in force and effective from Saturday – reintroduces the possibility that contractors’ paid leave will be lost. So it’s up to the umbrellas.

Clearly against the rewrite, the source said, “Here’s the point; we are talking about money that the worker has generated and that the umbrella has expressly withheld as provision for holiday pay.

“Just Not Good Enough”

The source is not alone in criticizing the new FCSA code from umbrella companies.

“We do not promise to [make just a] ‘reasonable effort’ to ensure our employees receive holiday pay,” says Champion Contractors Ltd, awkwardly for FCSA, a member company of FCSA.

Outlining his own stance on paid leave for contractors, Champion compliance chief Chris Bloor said the FCSA’s new “reasonable effort” test was “just not good enough”.

“It’s the employees’ money,” he pointed out, before alleging, “Any attempt to obfuscate the holiday payment process should be seen as an attempt to steal that hard-earned money.

‘The umbrella should happen to keep it?’

In an online exchange with Paul Chamberlain, head of employment law at FCSA legal partners JMW Solicitors, the lawyer asked Mr. Bloor:

“If the real objective is to protect the health and safety of workers, why is it wrong to tell them: ‘you are entitled to paid annual leave; we want you to take it for your health and safety and to encourage you to do so, if you don’t take the leave then you don’t get the pay? »

Speaking to ContractorUK, another legal expert answered Mr Chamberlain’s question: “So; should the parent company keep it? »

Expert says much of what the FCSA has said since founding JSA member faced allegations of withholding paid leave makes its new ‘reasonable effort’ test sound like a half -round.

‘Volte-face’

“This hasty rewrite of the FCSA code is the FCSA’s about-face,” the pundit began.

“Since the charges against JSA, both publicly and privately, FCSA has stated that ‘use it or lose it’ on paid contractor leave was not an acceptable practice by any of its members.

« CEO of FCSA [Chris Bryce] saying ‘use it or lose it’ is unacceptable’ repeatedly. Saying now that the brollies can just make a ‘reasonable effort’ to ensure it’s not lost? Good; that’s an eighty.

“At least eight weeks before”

In the 2021 version of the code – before the proposed A10 and the new A10 in the now effective 2022 code, FCSA umbrella companies were asked to remind staff to take vacations.

The 2021 code further required that such reminders be issued both “throughout the holiday year” and as the end of the holiday year approaches, specifically “at least four weeks before”. .

Updated on Saturday, the FCSA’s 2022 code appears to be more mindful of the practice, as it states that the holiday year-end reminder should be sent “at least eight weeks before”.

“Encourage vacation and paid holidays”

But then again, Champion’s Mr. Bloor is hardly a lawyer.

“We issue monthly reminders to all employees,” he posted. “[These monthly reminders] provide a running total of paid time off and encourage vacation and paid time off [to be taken].”

“[And]…if an employee has vacation pay withheld at the end of our vacation year, it will automatically be paid.

“[Further]if an employee no longer needs our services, any holiday pay withheld will be automatically paid out before their P45 can be issued.

“Paid instead”

Champion’s insurance director, Mr Bloor, said he shouldn’t need to reveal how his umbrella works, but “some umbrella companies… want to water down those standards”.

According to FCSA Code 2022 (containing the “reasonable effort” test), if an employee’s employment is terminated during a vacation year with full accrued vacation entitlement in progress, “he must be paid in lieu of his right to termination of employment”.

The current code also states that the FCSA allows carryover of unused leave entitlement and therefore where an umbrella performs the carryover, upon termination any accrued entitlement must be paid to the contractor instead.

“Unable to locate worker through reasonable effort”

“Any exceptions to these requirements must be logged internally with a clear explanation of why the exception occurred, and this log must be made available to FCSA for inspection,” code 2022 adds.

“Exceptional reasons may include, but are not limited to, death, inability to locate the worker through reasonable effort, [and] the worker’s refusal to accept.

As to how the FCSA may have imposed this series of new requirements, including the “reasonable effort” test, after a single umbrella company threatened to sue the proposed clause that it “ shouldn’t keep’ holiday pay, apparently that’s easy to explain.

“Open and Closed Case of the Dog’s Tail Wagging”

The legal expert said, “It’s simple. It is an open and closed case of the tail wagging the dog.

Meanwhile on LinkedIn, Mr. Bloor made a few calls.

“If you own or work for a recruiting/employment company that uses umbrella companies, then in the best interest of your contractors, I suggest you contact the company and ask them to confirm their processes for vacation pay,” he posted.

“Similarly… if you own or work for an umbrella company that disagrees with the above, then you should hang your head in shame.”

“Dramatically strengthened FCSA code”

But on behalf of the FCSA, chief executive Mr Bryce says its members’ paid contractor leave obligations were “significantly strengthened” on Saturday.

” As explained…[previously to readers of] ContractorUK it is the Working Time Regulations (WTR) that complicate matters for employers and employees by making it illegal to any employer to pay an employee in lieu of time off.

In a statement Friday in response to a question about changes to his umbrella code, the FCSA boss continued, “WTRs are really health and wellness measures, rather than tax-driven or wages, and they enshrine in law that it is vital that workers both have the right to and benefit from paid annual leave. »

“Using it or losing it on the contractor’s vacation pay is undesirable”

The statement continues: “That’s why our newly released codes have significantly strengthened the actions required of [our] members to proactively explain leave entitlements visibly and clearly to potential employees before contracts are signed, and to regularly and visibly remind their employees to actually take annual leave while on contract. »

Mr Bryce also said the FCSA “understands the difficulties in this area caused by the WTR”, but added that the association “does not believe that the ‘use it or lose it’ principle is a ” desirable outcome” of legislation.

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