The Construction Industry contractor I work for deducts tax from my invoiced payments. Is the contractor required to pay me holiday pay?

There is no Yes or No answer to this question. It all depends on the nature of the contractual relationship between you and the contractor. The are three possible situations. If the nature of your contractual relationship indicates that you are an employee of the contractor or that you are a “worker”, you are entitled to 5.6 weeks statutory holiday pay each year in holiday years starting April 2009 or later, as provided by theWorking Time Regulations 1998. If the relationship is such that you are self-employed, you are not entitled to holiday pay.

Your immediate reaction may be that you are self-employed. The contractor deducts 20% from your invoices towards your tax liabilities and you complete a tax return each year. However, even though you may be treated as self-employed for tax purposes, that does not automatically indicate that you are self-employed for employment rights such as holiday pay.

The first issue, therefore, is whether you are an employee. If you have regular on-going work with the contractor, in other words you are not engaged simply for the duration of a project, you are likely to be an employee. That is not a decision that you have to make, however. It is the contractor’s legal responsibility to get your employment status right, both for tax purposes and for employment rights purposes. If you are an employee, you should be paid through the contractor’s payroll and pay tax and National Insurance contributions (NICs) like all other employees. You are also entitled to holiday pay – not just the statutory entitlement but whatever the contractor provides under employment contracts. You may find booklet CIS349 Are your workers employed or self-employed? – Advice for contractors published by HM Revenue & Customs (HMRC) useful to understand the issues.

To help contractors, and employers in general, decide on whether subcontractors should be treated as employees or self-employed for tax purposes, HMRC provides an Employment Status Indicator tool. This uses a series of interactive questions that explore a person’s work arrangements. The tool may be used by contractors/employers and by individuals and is available at www.hmrc.gov.uk/calcs/esi.htm. If your contractor is willing, it would be useful to work through the questions together.

If you are not an employee, the next issue is whether you are a “worker”. If you are a skilled tradesman without a business structure and you work for one contractor for the duration of a construction project, you are likely to be a “worker”. The Employment Appeal Tribunal, in a number of tribunal cases, has decided that skilled tradesmen, such as bricklayers and plumbers, who were registered as Construction Industry subcontractors, were “workers” and therefore entitled to holiday pay.

If you don’t fall into either the “employee” or “worker” categories because you are set up as a business, perhaps with your own business premises and equipment, and you work for more than one contractor or client at a time, then you are self-employed for employment rights – which means basically that you don’t get any!

You should also read the more detailed information on this subject in the FAQ I am self-employed. Am I entitled to holiday pay or any other benefits from my client?

More FAQs Related to Holiday Pay
Can my employer deduct holiday pay from my final wages?