You’re working through an umbrella company, and someone just told you you’re “not a real employee” or that you don’t get the same rights as permanent staff. That’s complete rubbish, and it’s time you knew the truth about what you’re actually entitled to.
Here’s what most contractors don’t realise: the moment you sign up with an umbrella company, you become a proper employee with the exact same statutory rights as someone working a permanent office job. Holiday pay, sick pay, maternity leave, pension contributions, protection from discrimination – you get all of it.
This guide breaks down every single right and benefit you have as an umbrella contractor. You’ll learn what you’re entitled to from day one, how to calculate your benefits, when they kick in, and exactly how to claim them when you need them. No legal jargon, no vague promises, just the facts about what’s yours by law.
What’s Your Status as an Umbrella Employee?
As an umbrella company employee, you have identical rights to permanent employees including holiday pay, sick pay, maternity and paternity leave, pension contributions, protection from discrimination, and unfair dismissal rights after qualifying periods, while maintaining the flexibility to choose your contracts and work locations without sacrificing any statutory protections.
This is the bit that confuses most contractors. You’re employed by the umbrella company, not the agency and not the end client. Your umbrella is your legal employer, which means employment law applies to you exactly the same way it applies to someone working in a regular job.
Read this article to understand more about working through an umbrella company.
The Hybrid Setup That Works in Your Favour
You get the best of both worlds here. The umbrella company employs you, pays your taxes through PAYE, and handles all your statutory rights. But you still choose which contracts to take, when to work, and where to work. You’re not tied to one client, one location, or one type of project.
This employment status matters more than you might think. Banks and mortgage lenders see continuous employment rather than gaps between contracts. You build up service time that counts toward certain rights. Your P60 shows stable income rather than sporadic self-employment.
How Your Rights Build Over Time
Some rights kick in immediately, others need qualifying periods. Here’s the timeline:
Day one: You get protection from discrimination, the right to be paid at least minimum wage, and itemized payslips showing exactly where your money goes. Your holiday pay starts accruing from your first working day.
After 12 weeks: If you’re working at the same client site continuously, you get equal treatment rights under Agency Worker Regulations. This means you should receive the same basic working conditions as permanent staff doing comparable work.
After 12 months: You become eligible for statutory maternity, paternity, adoption, and shared parental leave and pay, provided you meet the earnings thresholds.
After 2 years: You gain protection from unfair dismissal and become eligible for statutory redundancy pay if your employment ends through no fault of your own, though this rarely applies to contractors due to the assignment-based nature of the work.
Why This Matters for Your Financial Life
Continuous employment makes your life easier when you need to prove income. Mortgage applications get simpler because lenders see steady employment rather than self-employment with variable income. Credit checks show stable work history. References come from your umbrella company showing years of continuous service.
You’re building up qualifying time for benefits you might need later. If you get pregnant, fall seriously ill, or face redundancy, your continuous service time determines what you can claim. Starting from scratch with each contract would reset this clock.
Holiday Pay: What You’re Actually Entitled To
Umbrella contractors receive 5.6 weeks of paid annual leave per year, which equals 28 days for full-time workers or 12.07% of hours worked for part-time and irregular schedules, accrued based on actual time worked and payable either as retained holiday held by the umbrella or rolled up into each payslip depending on your arrangement.
Let’s get straight to the maths because this confuses more contractors than any other benefit.
How the Accrual Method Works
Your holiday entitlement accrues based on the hours you actually work. For every hour you work, you earn holiday pay. The calculation uses 12.07%, which comes from dividing 5.6 weeks by 46.4 weeks (52 weeks minus 5.6 weeks of holiday).
If you work 40 hours in a week, you accrue 4.828 hours of holiday pay (40 × 0.1207). If you work irregular hours, the same percentage applies regardless of how many hours you put in each week.
Two Ways Umbrellas Handle Holiday Pay
Retained holiday: Your umbrella company holds your holiday pay in a separate pot and pays it out when you request time off or when you leave. You see it building up on your payslips but don’t receive it until you claim it.
Rolled-up holiday: Your umbrella adds 12.07% to each payment, so you receive your holiday pay with every payslip. This gives you the money up front but means you don’t get paid again when you take time off.
Most umbrellas use the retained method because rolled-up holiday pay sits in a legal grey area. HMRC and employment tribunals prefer retained holiday because it better protects workers’ rights to actual paid time off.
Calculating What You’ll Get
If you’re earning £350 per day and work 5 days, your weekly gross is around £1,750. Your holiday accrual for that week would be £211.23 (£1,750 × 0.1207). Over a full year working 46.4 weeks, you’d accrue £9,801.07 in holiday pay, which equals 5.6 weeks at your day rate.
The key thing to remember: your holiday pay should match your normal earnings. If you typically work 5 days per week at £350 per day, your holiday pay should be £350 per day when you take time off, not some reduced rate.
Further reading: Umbrella Company Holiday Pay Explained
Taking Holidays Between Contracts
This is where umbrella companies beat limited companies hands down. You can claim your accrued holiday pay between contracts without needing to be actively working. Your umbrella owes you that money regardless of whether you’re on assignment.
Some umbrellas pay it out automatically when you’re between contracts. Others require you to request it. Either way, it’s your money and you’re entitled to it based on the hours you’ve already worked.
What Happens When You Leave
If you’ve got unused holiday when you leave your umbrella company, they must pay it out in your final payment. They can’t withhold it, they can’t reduce it, and they can’t roll it into some future arrangement. The accrued holiday pay is yours by law.
The calculation for final holiday pay uses the same 12.07% method applied to all hours worked during your employment. If you worked 500 hours and haven’t taken any holiday, you’re owed 60.35 hours of holiday pay (500 × 0.1207).
Bank Holidays Don’t Add Extra Days
Your 5.6 weeks includes bank holidays, not in addition to them. Some contractors expect 28 days plus 8 bank holidays, but that’s not how statutory minimum works. You get 5.6 weeks total, which covers everything including bank holidays.
If you work on a bank holiday, you should get paid for that day as normal working time plus have your holiday accrual increase based on those hours. You don’t automatically get extra time off or double pay unless your contract specifically says so.
Sick Pay: When You Can Claim and How Much You Get
Statutory Sick Pay currently pays £116.75 per week for up to 28 weeks if you earn at least £123 per week, qualify after three waiting days of sickness, and provide proper notification and medical evidence to your umbrella company within required timescales.
Sick pay sounds straightforward until you need to claim it, then suddenly nobody’s clear on the rules. Here’s exactly how it works.
The Three-Day Wait That Catches People Out
You don’t get paid for the first three days of any period of sickness. These are called waiting days, and they’re unpaid by law. Only from day four onwards do you start receiving SSP.
If you’re sick for two days and then recover, those days are unpaid. If you’re sick again within eight weeks, you don’t get another waiting period – you continue from where you left off. But if you’re well for more than eight weeks and then fall sick again, you get a fresh three-day waiting period.
How Much You Actually Receive
SSP pays £116.75 per week at current rates, which breaks down to roughly £23.35 per day for a five-day working week. This is way less than your normal earnings, so being sick costs you money unless your umbrella offers enhanced sick pay.
Some umbrella companies offer company sick pay that tops up SSP to a higher amount, but this is not standard and not required by law. Most umbrellas only pay statutory minimum, which means you’re taking a big income hit when you’re ill.
Qualifying for SSP
You need to meet three conditions to get SSP:
You must earn at least £123 per week on average. If you’re earning £350 per day and working even one day per week, you’ll clear this threshold easily.
You must have a period of incapacity for work, which means you’re too ill to do your normal job. A doctor’s fit note proves this for absences longer than seven days. For shorter absences, self-certification is enough.
You must notify your umbrella company within their required timescale, usually within a few days of falling sick. Check your employment contract for exact notification rules.
The 28-Week Limit
SSP only lasts for 28 weeks in any period of sickness. After that, it stops even if you’re still unfit to work. At that point, you’d need to look at Employment and Support Allowance (ESA) or other benefits, but you’re no longer getting SSP from your umbrella.
For most contractors, 28 weeks is plenty because serious long-term illness usually ends the contract anyway. But it’s worth knowing the limit exists if you’re dealing with something serious.
What Your Umbrella Can and Can’t Ask
Your umbrella can ask for reasonable evidence of your sickness. For absences up to seven days, self-certification is sufficient – you just tell them you’re sick and that’s accepted. For anything longer than seven days, they can require a fit note from your GP.
They cannot demand to know your specific diagnosis. They cannot require you to see a company doctor for short absences. They cannot withhold SSP because you didn’t provide unnecessary information. The rules are clear about what evidence they can request.
Working While Receiving SSP
You can’t work for your umbrella and receive SSP at the same time. If you’re well enough to work, you’re not entitled to sick pay. But here’s the grey area: if you do some light work from home or answer a few emails, does that count as working?
Legally, if you’re doing any work related to your contract, you’re not sick for SSP purposes that day. Some contractors try to stay partially active to keep clients happy, but this can jeopardize their SSP claim if the umbrella finds out.
Maternity, Paternity and Parental Leave
Pregnant umbrella contractors qualify for up to 52 weeks of maternity leave with 39 weeks of Statutory Maternity Pay at £184.03 per week or 90% of average earnings for the first six weeks, provided you’ve worked continuously for 26 weeks before the 15th week before your due date and earn above £123 weekly.
This is where umbrella employment really shows its worth compared to limited companies or sole trading.
Maternity Leave: Your Full Entitlement
You can take up to 52 weeks off work when you have a baby. The first 26 weeks are called Ordinary Maternity Leave, and the second 26 weeks are Additional Maternity Leave. You don’t have to take the full 52 weeks, but you must take at least two weeks off after birth (four weeks if you work in a factory).
You can start your maternity leave any time from 11 weeks before your due date. If your baby arrives early, your leave starts automatically the day after birth. If you’re off sick with a pregnancy-related illness in the four weeks before your due date, your maternity leave starts automatically.
Statutory Maternity Pay Breakdown
SMP pays in two stages:
First six weeks: You receive 90% of your average weekly earnings before tax. If you normally earn £350 per day working five days, your weekly gross is around £1,750, so you’d get approximately £1,575 per week during these first six weeks.
Next 33 weeks: You receive either £184.03 per week or 90% of your average weekly earnings, whichever is lower. For most contractors earning decent day rates, this will be the £184.03 rate.
After 39 weeks, SMP stops. The final 13 weeks of leave are unpaid unless your umbrella offers enhanced maternity pay, which most don’t.
Qualifying for Maternity Pay
You need to meet these conditions:
You must have worked continuously for your umbrella for at least 26 weeks by the end of the 15th week before your due date. This is roughly six months of continuous employment finishing about four months before you’re due.
You must earn at least £123 per week on average during the eight weeks leading up to the 15th week before your due date. If you’re contracting regularly, you’ll easily clear this threshold.
You must give proper notice by the end of the 15th week before your due date, telling your umbrella when the baby is due and when you want your leave to start. You’ll also need a MAT B1 form from your midwife or doctor.
Paternity Leave for Partners
If you’re the partner of someone having a baby, you get two weeks of paternity leave that you can take as either one solid block or two separate weeks. You can take this any time within 56 days of the birth.
Statutory Paternity Pay mirrors the lower rate of SMP – currently £184.03 per week or 90% of your average weekly earnings, whichever is lower. For most contractors, this means £184.03 per week for your two weeks off.
To qualify, you need 26 weeks of continuous employment ending with the 15th week before the due date, and you need to earn above £123 per week. You also need to give your umbrella at least 15 weeks’ notice before the due date.
Shared Parental Leave
This lets you and your partner share up to 50 weeks of leave and 37 weeks of pay between you, taken in multiple blocks if you want. It’s more flexible than standard maternity leave but requires both parents to meet eligibility criteria and give proper notice.
SPL pay matches the lower rate of SMP – £184.03 per week or 90% of earnings, whichever is less. You lose the six weeks at 90% that maternity leave offers, so many couples stick with traditional maternity leave for the mother to get that higher initial pay.
Adoption Leave Works the Same Way
If you’re adopting, you get the same leave and pay entitlements as maternity – up to 52 weeks leave with 39 weeks of pay. The qualifying conditions and notification requirements mirror maternity leave, just adjusted for adoption matching dates instead of pregnancy dates.
Returning to Work
You have the right to return to the same job if you come back within 26 weeks. If you take the full 52 weeks, you’re entitled to return to the same job or, if that’s not reasonably practicable, a similar job with the same terms and conditions.
Your umbrella can’t treat you less favourably because you took maternity, paternity, or parental leave. If they try to reduce your day rate, refuse to offer you contracts, or otherwise penalize you for having a child, that’s discrimination and you can take legal action.
Your Workplace Pension Rights
All umbrella contractors earning over £10,000 yearly are automatically enrolled into a workplace pension with minimum contributions of 8% of qualifying earnings split between 5% employee contribution and 3% employer contribution, though you can opt out within one month of enrolment with the understanding that you’re giving up free money and long-term savings.
Pensions sound boring until you realize it’s free money from your employer and tax relief from HMRC.
Auto-Enrolment Explained
If you earn more than £10,000 per year from your umbrella work, they must automatically enroll you in their workplace pension scheme. You don’t need to ask for it, they’re legally required to set it up for you.
Most umbrellas use NEST (National Employment Savings Trust) or another large pension provider. Once enrolled, contributions come out of your pay automatically each time you’re paid. You’ll see the deduction clearly on your payslip.
How Much Goes In Each Month
The law requires minimum contributions of 8% of your qualifying earnings, split between you and your employer:
Your contribution: 5% of qualifying earnings comes out of your pay after tax relief, which reduces it to 4% actual cost to you because you get basic rate tax relief automatically.
Employer contribution: 3% of qualifying earnings goes in from your umbrella company, which is genuinely free money you wouldn’t get otherwise.
Qualifying earnings sit between £6,240 and £50,270 per year. If you earn £350 per day working roughly 200 days per year, your yearly gross is £70,000, but only £44,030 counts as qualifying earnings for pension purposes.
Real Impact on Your Take-Home
Let’s say you gross £1,500 per week. Your qualifying earnings for that week would be around £845 (the portion between lower and upper thresholds). You’d contribute 5% of £845, which is £42.25 per week, but tax relief reduces your actual cost to £33.80 per week.
Your employer adds £25.35 (3% of £845), so the total going into your pension is £67.60 per week. Over a year working 46 weeks, that’s £3,109.60 building up, and you only paid £1,554.80 of it yourself after tax relief.
Learn more about Salary Sacrifice and Your Pension
Opting Out and Why You Shouldn’t
You can opt out within one month of being enrolled, and you’ll get back any contributions taken during that month. After the first month, you can still opt out but you won’t get back what’s already been contributed.
Here’s why opting out is usually a mistake: you’re refusing 3% free money from your employer plus tax relief on your own contributions. That’s a 60% return before any investment growth. Even if you’re tight on cash now, that long-term return is huge.
Some contractors opt out thinking they’ll invest better elsewhere or preferring higher take-home now. Unless you’re actually investing that extra money somewhere and beating a 60% instant return, you’re losing out.
What Happens When You Switch Umbrellas
Your pension pot stays where it is when you switch umbrella companies. The old umbrella stops contributing, the new umbrella auto-enrolls you into their scheme (which might be the same provider or a different one), and contributions resume.
You can leave your old pot where it is or transfer it to your new pension. Most people leave small pots alone and consolidate them later when they’ve built up several. There’s no rush to transfer, and you keep all the money regardless.
Accessing Your Pension Later
You can access your workplace pension from age 55 (rising to 57 in 2028). You can take 25% tax-free as a lump sum, and the rest gets taxed as income when you withdraw it. Most people don’t touch it until actual retirement, letting it grow tax-free for decades.
The key thing: this is your money, not your umbrella’s. If your umbrella goes bust, your pension is protected in a separate scheme. If you die, it passes to your nominated beneficiaries. It’s genuinely yours and worth contributing to.
Working Time Regulations: Your Limits and Breaks
UK Working Time Regulations limit contractors to an average 48-hour working week calculated over 17 weeks unless you opt out in writing, mandate 11 hours daily rest between shifts and 24 hours weekly rest, require a 20-minute break for shifts over six hours, and provide special protections for night workers averaging over three hours nightly between 11pm and 6am.
These rules stop employers from working you into the ground, though many contractors opt out of the 48-hour limit to take as much work as they can get.
The 48-Hour Maximum Week
You can’t be forced to work more than 48 hours per week on average, calculated over a 17-week period. This is an average, not a strict weekly limit, so you might work 60 hours one week and 35 the next, averaging under 48.
The calculation includes time worked for all employers if you have multiple contracts. If you’re working through an umbrella plus doing other work on the side, those hours add together for the 48-hour limit.
Most contractors working on client sites hit somewhere between 37.5 and 40 hours per week anyway, so the limit rarely bites in practice. But it’s there if your client tries pushing you to regular 60-hour weeks.
Opting Out of the 48-Hour Limit
You can sign a form opting out of the 48-hour limit, which lets you work as many hours as you and your umbrella agree. This opt-out is voluntary – nobody can force you to sign it, and you can cancel it with seven days’ notice (or longer if your contract specifies up to three months).
Many umbrella companies ask you to opt out during onboarding because it gives you and them more flexibility. Clients sometimes want contractors working extra hours during crunch periods, and the opt-out allows this legally.
But here’s the thing: just because you’ve opted out doesn’t mean you must work over 48 hours. It just means you can if you want to. You’re still in control of what work you accept.
Read this for more understanding: 48 Hour Work Week – Opt-in or Opt-out?
Daily Rest: The 11-Hour Rule
You’re entitled to at least 11 consecutive hours off between working days. If you finish work at 7pm, you shouldn’t be expected to start before 6am the next morning. This applies every 24-hour period.
This rule prevents situations where you’re working until midnight then back at 8am the next day running on five hours’ sleep. Employers can’t legally schedule you this way unless you’re in an excepted category like emergency services.
Weekly Rest: One Day Off
You must get at least 24 hours completely off work every seven days, or 48 hours off every 14 days. This is your full day of rest where nobody can require you to work, check emails, or be on call.
Some contracts try to push “on-call” time where you’re technically off but need to be available. If you’re restricted in what you can do during that time, it might count as working time rather than rest time, depending on the specifics.
Rest Breaks During Shifts
If you work more than six hours in a day, you’re entitled to at least a 20-minute uninterrupted rest break away from your workstation. This can be unpaid, but you must be allowed to take it.
“Uninterrupted” means you’re not working, not on call, and not monitoring anything. “Away from your workstation” means you can’t just sit at your desk eating lunch while keeping an eye on emails. You need proper time completely away from work.
Most contractors take lunch breaks anyway, so this rarely causes issues. But if your client is pushing you to work through lunch regularly, you can point to this legal requirement.
Night Work Rules
If you work at least three hours during night time (11pm to 6am) on a regular basis, you’re classified as a night worker. Night workers get additional protections:
You can’t be forced to work more than an average of eight hours per 24-hour period measured over 17 weeks. This is stricter than the 48-hour weekly limit for day workers.
You’re entitled to free health assessments before starting night work and at regular intervals after. Your umbrella must offer this, though you can decline it.
Night work that involves special hazards or heavy physical or mental strain cannot exceed eight hours in any 24-hour period, not as an average but as a hard limit.
What Counts as Working Time
Working time includes any time you’re working, at your employer’s disposal, or carrying out your duties. This covers:
All time spent actively working at your desk, on site, or delivering your services.
Time spent traveling between sites during your working day (not your commute to and from home, but travel between clients or locations during work hours).
Training time required by your employer.
On-call time where you must remain at the workplace or somewhere nearby – though on-call time at home where you’re free to do what you want doesn’t count.
Record Keeping
Your umbrella company must keep records showing you’re not exceeding the 48-hour average (unless you’ve opted out) and that you’re getting your rest breaks and time off. They’re legally required to monitor this.
You should keep your own records too if you’re working multiple contracts or doing side work beyond your umbrella employment. HMRC can ask for evidence that you’re within working time limits, and having your own records protects you.
Protection from Discrimination and Unfair Treatment
All umbrella contractors receive full protection from discrimination based on nine protected characteristics including age, disability, gender, race, religion, sexual orientation, pregnancy, marriage, and gender reassignment from day one of employment, with additional protection from unfair dismissal kicking in after two years of continuous service.
Your rights here are identical to permanent employees, not watered down because you’re a contractor.
The Nine Protected Characteristics
The Equality Act protects you from discrimination based on:
Age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex, and sexual orientation.
If your umbrella, your agency, or your end client treats you less favourably because of any of these characteristics, that’s illegal discrimination and you can take action.
What Counts as Discrimination
Direct discrimination: Someone treats you worse than they’d treat someone else because of a protected characteristic. If your client refuses to offer you a contract extension because you’re pregnant, that’s direct discrimination.
Indirect discrimination: A rule or policy that applies to everyone but disadvantages people with a protected characteristic. If your umbrella has a rule that you must work Saturdays and this discriminates against people whose religion requires Saturday worship, that could be indirect discrimination unless it’s justified.
Harassment: Unwanted conduct related to a protected characteristic that violates your dignity or creates a hostile environment. This includes offensive jokes, comments, or behavior that makes you uncomfortable based on who you are.
Victimization: Treating you badly because you complained about discrimination or helped someone else with their discrimination claim. If your agency stops offering you work after you raised a discrimination issue, that’s victimization.
Equal Pay Rights
Men and women doing equal work must receive equal pay. If you discover a contractor of the opposite sex doing the same job as you but getting a higher day rate, and the only difference is gender, you have grounds for an equal pay claim.
“Equal work” means like work, work rated as equivalent, or work of equal value. It doesn’t have to be identical jobs, just work that’s broadly comparable in skill, effort, and responsibility.
Protection Starts From Day One
You don’t need any qualifying period for discrimination protection. From your first day of employment with your umbrella, you’re protected. This applies even during probation periods or short-term contracts.
If discrimination happens during recruitment, you’re protected even though you’re not employed yet. If an agency refuses to put you forward for contracts because of your age, race, or disability, that’s unlawful discrimination.
Unfair Dismissal Protection After Two Years
After you’ve been continuously employed for two years, you gain protection from unfair dismissal. Your umbrella can’t end your employment without a fair reason and a fair process.
Fair reasons for dismissal include capability (you can’t do the job), conduct (you’ve done something wrong), redundancy (the job no longer exists), illegality (continuing to employ you would break the law), or some other substantial reason.
For most contractors, this rarely comes up because your contracts end naturally when assignments finish. But if your umbrella tries to dismiss you from their books entirely after two years, they need a valid reason and must follow proper procedures.
What to Do If You Experience Discrimination
Start by raising it with your umbrella company formally in writing. Many issues get resolved at this stage once HR understands what’s happening.
If that doesn’t work, contact ACAS (Advisory, Conciliation and Arbitration Service) for free advice and potentially early conciliation. ACAS helps resolve disputes without going to tribunal.
You have three months minus one day from the date of discrimination to start tribunal proceedings. Don’t wait until the last minute because ACAS early conciliation can extend timescales, but you need to start within that three-month window.
Employment tribunals can award compensation for financial losses, injury to feelings, and sometimes aggravated damages if the discrimination was particularly bad. There’s no cap on discrimination compensation awards.
Where to Get Help
ACAS offers free advice and conciliation services. Citizens Advice can help you understand your rights and how to pursue claims. The Equality Advisory and Support Service (EASS) provides specialist advice on discrimination issues.
If you’re in a union, they’ll support you through discrimination claims including legal representation. Some umbrella contractors join unions specifically for this legal backing.
Redundancy Rights for Umbrella Contractors
Umbrella contractors qualify for statutory redundancy pay after two years of continuous employment if their employment ends due to redundancy rather than contract completion, calculated at one week’s pay per year of service for ages under 22, rising to 1.5 weeks per year over age 41, capped at £643 weekly maximum and 20 years’ service.
Redundancy rarely applies to contractors because contracts ending naturally isn’t redundancy, but it can happen in specific situations.
When Redundancy Actually Applies
Redundancy occurs when your job no longer exists or your employer needs fewer people doing your type of work. For umbrella contractors, this typically only happens if:
Your umbrella company goes bust and stops trading entirely. Your employment ends because the employer no longer exists, which counts as redundancy.
Your umbrella company massively downsizes and ends the employment of multiple contractors because they no longer need payroll employees. This is rare because most umbrellas want to keep contractors on their books.
What’s not redundancy: your client contract ending, your agency stopping sending you work, or you choosing not to take assignments. These are normal parts of contractor life and don’t trigger redundancy rights.
Calculating Your Redundancy Pay
If you do qualify, the calculation works like this:
One week’s pay for each full year of service under age 22, 1.5 weeks’ pay for each full year between ages 22 and 40, and two weeks’ pay for each full year over age 41.
“One week’s pay” is capped at £643, so even if your normal weekly gross is £1,750, the calculation maxes out at £643 per week. Maximum service counted is 20 years.
Example: You’re 35 years old with three years of continuous umbrella employment. You’d get 4.5 weeks’ pay (three years × 1.5 weeks). At the £643 cap, that’s £2,893.50 total.
Why This Rarely Matters for Contractors
Most contractors switch umbrellas or take breaks between contracts regularly, which breaks continuous employment. You’d need to stay with the same umbrella company for two full years without any gaps to even qualify.
Even then, your umbrella would need to make you redundant rather than you just finishing contracts naturally. Umbrellas rarely do this because keeping contractors on their books costs them nothing when you’re between assignments.
The main scenario where this comes up is if your umbrella company goes into administration or liquidation. At that point, you can claim redundancy pay from the government’s Redundancy Payments Service if your umbrella can’t pay.
Consultation Rights
If your umbrella is making 20 or more people redundant within 90 days, they must consult with affected employees for at least 30 days before the first dismissal. For 100 or more redundancies, consultation must run at least 45 days.
In practice, umbrella companies rarely make contractors redundant in large numbers, so collective consultation requirements almost never apply. But individual contractors facing redundancy should receive proper notification and be given the chance to discuss their situation.
What You’re NOT Entitled To
Umbrella contractors do not receive enhanced benefits beyond statutory minimums, cannot claim most business expenses through the umbrella due to HMRC rules, have no right to remain on specific client contracts after they end, lack access to employer training or career development programs, and typically don’t qualify for company perks like cars, phones, or gym memberships that permanent employees might receive.
This section sets realistic expectations about where umbrella employment stops.
No Right to Stay on a Contract
Your client can end your assignment any time with little or no notice, and you have no legal recourse unless the reason is discriminatory. When your contract says it ends Friday, it ends Friday. There’s no unfair dismissal protection for the contract ending because you’re not being dismissed from your employment – you’re just finishing an assignment.
This is the biggest difference between umbrella employment and permanent work. Permanent employees have notice periods and dismissal procedures. You have flexibility but less security on individual contracts.
Limited Expense Claims
HMRC rules severely restrict what expenses umbrella contractors can claim. You cannot claim travel between home and your client site as an expense because HMRC considers this ordinary commuting. You cannot claim meals, accommodation, or other costs unless very specific conditions apply.
Some contractors compare this to limited companies where directors can claim more expenses. That’s true, but it’s the price of having your tax handled through simple PAYE and not dealing with corporation tax returns and IR35 assessments.
No Enhanced Benefits Unless Specified
Your umbrella might offer benefits beyond statutory minimums like extra sick pay, enhanced maternity pay, or private medical insurance, but they’re not required to. Most umbrellas stick to statutory minimums only.
Permanent employees often get company cars, mobile phones, gym memberships, or other perks. Umbrella contractors get their salary and statutory benefits, nothing more unless explicitly offered.
Training and Development
Your umbrella company has no obligation to provide training, career development, or skills advancement. If you want to learn new skills or get certifications, that’s on you to organize and pay for.
Some clients might offer training while you’re on assignment, but that’s the client’s choice, not something your umbrella handles. You’re responsible for keeping your skills current and marketable.
Company Benefits and Perks
Don’t expect access to employee benefits like staff discounts, social clubs, or company events. Your umbrella is processing your payroll and handling your statutory rights, not providing the full employment experience of a traditional company.
This isn’t a downside unique to umbrellas – it’s just the nature of contractor work. You trade those perks for higher day rates and flexibility to choose your work.
How to Actually Claim Your Rights
To claim holiday pay, submit a request through your umbrella’s portal or via email at least two weeks before your intended time off, providing dates and expected payment, with the umbrella legally required to pay your accrued entitlement either before your holiday or during it depending on their policy, and escalate to ACAS if they refuse without valid reason.
Knowing your rights means nothing if you don’t know how to claim them when needed.
Claiming Holiday Pay Step by Step
Log into your umbrella’s contractor portal or contact their payroll team directly. Most have online systems for requesting holiday.
Submit your request at least two weeks before you want time off. Include the dates you’ll be away and confirm whether you want holiday pay paid in advance or with your normal payment cycle.
Your umbrella reviews the request, checks your accrued balance, and either approves it immediately or queries if you don’t have enough accrued holiday.
Payment arrives either just before your holiday or in your next regular payment depending on your umbrella’s policy. You should receive your full day rate for each holiday day, not a reduced amount.
If your umbrella refuses to pay accrued holiday without a valid reason, follow their formal complaints procedure first. If that fails, escalate to ACAS for free mediation. As a last resort, you can take them to employment tribunal for unlawful deduction of wages.
Requesting Sick Pay
Notify your umbrella as soon as you’re sick, ideally on the first day. Most umbrellas have a sickness notification line or email. Check your contract for their specific notification requirements.
For absences up to seven days, self-certification is enough. You just tell them you’re sick and unable to work. For longer absences, you’ll need a fit note from your GP starting from day eight.
SSP kicks in from day four of sickness. Your umbrella will include it in your next regular payment automatically once they’ve received proper notification and any required evidence.
If they refuse to pay SSP when you’ve met all the qualifying conditions, challenge it formally in writing. Point to the specific qualifying criteria you’ve met. If they still refuse, ACAS can help mediate.
Notifying Maternity or Paternity Leave
You must notify your umbrella in writing by the 15th week before your due date for maternity leave. Include your due date, when you want your leave to start, and attach your MAT B1 certificate from your midwife or doctor.
For paternity leave, give at least 15 weeks’ notice before the due date, stating when the baby is due and when you want your leave.
Your umbrella should confirm your entitlement and payment details in writing within 28 days. They’ll tell you how much SMP or SPP you’ll receive and when payments will happen.
Payments usually come through your regular payroll cycle, not as a lump sum. You’ll get payslips showing maternity or paternity pay just like regular salary.
Raising Issues or Complaints
Start with your umbrella’s internal complaints procedure. Most have a formal grievance policy. Submit your complaint in writing, clearly explaining what’s wrong and what you want done about it.
Give them a reasonable time to respond – usually 7 to 14 days for initial acknowledgment, then longer for full investigation. Get everything in writing so you have records.
If internal complaints don’t resolve things, contact ACAS for early conciliation. This is free and often resolves disputes without tribunal proceedings.
For discrimination claims, you must contact ACAS within three months minus one day of the discriminatory act. For other issues like unpaid holiday, you have three months from when the payment was due.
Employment tribunals are your last resort when everything else fails. You’ll need evidence of everything – contracts, payslips, emails, notification dates, responses from your umbrella. Keep meticulous records from day one.
Keeping Your Own Records
Don’t rely on your umbrella to track everything perfectly. Keep your own records of hours worked, holiday accrued and taken, sick days, notifications you’ve sent, and responses you’ve received.
Screenshot your payslips every time you’re paid. Save all emails about holiday requests, sickness notifications, or any issues. If something goes wrong months later, you’ll have evidence to back up your claims.
Track your continuous employment dates carefully. Note when you started with your umbrella, any gaps in work, and when you hit milestones like 12 weeks, 26 weeks, 12 months, and 2 years. These dates matter for various entitlements.
Read here to know your holiday pay rights
Know Your Worth as an Umbrella Contractor
You’re not a second-class worker because you’re contracting through an umbrella. You have proper employment with real statutory rights that match permanent employees in almost every way. Holiday pay, sick pay, maternity leave, pensions, legal protections – they’re all yours from day one.
The key is actually knowing what you’re entitled to and not letting anyone tell you otherwise. Too many contractors accept less than they should because they think flexibility means fewer rights. It doesn’t. You get both the flexibility of choosing your contracts and the security of employee protections.
Check your payslips every time to make sure you’re getting the right holiday accrual. Request sick pay if you need it without worrying you’re being difficult. Take your full maternity or paternity leave without feeling guilty. Contribute to your pension because it’s free money and tax relief combined. Report discrimination immediately because the law backs you up completely.
If your umbrella tries to deny you any statutory right covered in this guide, challenge it. You have ACAS backing you for free, employment tribunals if needed, and the law clearly on your side. Don’t accept less than you’re legally entitled to just because you’re a contractor.
For more details on choosing a compliant umbrella company that respects your rights, check the complete guide on what makes umbrella companies compliant in the UK. To understand how your pay and deductions work, see the full breakdown in the contractor pay and tax guide. And for staying on the right side of IR35 regulations, the compliance guide covers everything you need.
