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MPs slam FCSA for declining to answer questions on umbrella companies withholding holiday pay

Freelance and Contractor Services Association under fire from MPs for declining to answer questions about the umbrella companies that make up its membership and their stance on ensuring contractors receive their holiday pay entitlements

The Freelance and Contractor Services Association (FCSA) will continue to ignore requests for clarification from MPs about the action it is taking to prevent umbrella company contractors from missing out on holiday pay, its CEO has confirmed to Computer Weekly. 

The Association, which provides accreditation for compliantly-run umbrella companies, has incurred the wrath of the All-Party Parliamentary Loan Charge & Taxpayer Fairness Group (APPG) for turning down two written requests for information about its approach to ensuring its members do not withhold the holiday pay accrued by the contractors on their books.

The APPG first wrote to FCSA CEO Chris Bryce in March 2022, in the wake of a case heard at the Court of Appeal involving Pimlico Plumbers. The ruling saw one of the company’s ex-employees told he could claim back the holiday pay he was denied during his tenure at the firm, which was previously withheld on the grounds that the company considered him to be a self-employed contractor – not an employee. 

The APPG’s March 2022 letter to Bryce sought clarification about how the ruling affected the umbrella companies the FCSA had accredited, as well as a series of questions about the spate of cyber attacks that affected several of its members at the start of the year.

In a follow-up letter to Bryce, dated 14 July 2022, the APPG said it was “surprised and disappointed” to have received no response to the questions posed in its March 2022 letter.

“We asked the FCSA questions that we believe are entirely reasonable and also important questions that need answers,” it wrote. “The refusal to answer these questions gives the impression to us that, despite the considerable concern about umbrella companies, you [Bryce] and the FCSA are not willing to engage openly and transparently about very important issues that affect thousands of workers that use FCSA-accredited companies.”

What’s the deal with holiday pay?

The withholding of holiday pay is often flagged as a marker of a non-compliant umbrella company. Many of these firms operate an accrued holiday pay model that sees their contractors accumulate holiday pay over the course of the calendar year.

This model has come in for some criticism in the past, as some umbrella companies take the view that if the money accrued is not claimed by the year-end, they are entitled to keep it. 

There is no statutory legislation stating that umbrella companies need to notify contractors that they need to take holiday or will lose their money if they do not claim it by a certain date.

However, the outcome of the Court of Appeal Pimlico Plumbers case could change that, in that the ruling stated that an employee can only lose the right to claim back their holiday pay if the employer can prove that it “specifically and transparently” made the employee aware that they had to take paid leave and the right to it would be lost at the end of the year.

“If the employer cannot meet that burden, the right does not lapse but carries over and accumulates until termination of the contract, at which point the worker is entitled to a payment in respect of the leave taken,” the ruling said.

This potentially means that IT contractors that have fallen victim to this practice could be entitled to claim back any holiday pay they accrued and were previously denied.

The APPG stated that Bryce had refused to answer its questions for “commercial confidentiality/sensitivity” reasons, and had objected to the fact that the Group publishes all the letters it sends to ministers, government departments and other organisations in full online.

“The FCSA under your leadership is the only organisation to protest about us publishing letters,” the letter added. “No other body has refused to respond to our letters or complained about us publishing them.”

To reinforce this point, the APPG then pointed to the fact that it had received a “full and open (and public)” response from fellow umbrella accreditation provider Professional Passport, when it put a similar line of questions to its CEO.

“Workers who use umbrella companies may question why they [Professional Passport] are prepared to answer our questions and yet the FCSA are not,” the letter added. “You must surely realise this does nothing to reassure workers using FCSA-accredited companies, which indeed may lead to them having more, not less, concern.”

As well as the questions covered in its first letter to the FCSA, the APPG said that during the intervening months, it had accrued further questions on the topic of withheld holiday pay on which it wanted the FCSA’s feedback.

These included questions relating to allegations that came to light in March 2022 about FCSA-accredited umbrella company Workwell pocketing the holiday pay of a contractor it engaged for six months back in 2020.  

Read more about umbrella companies

As reported by Computer Weekly, the FCSA said the Workwell case was “under investigation” and once that process was completed, the Association would comment further.

The APPG’s letter asked for further information about the status of that investigation and when it was conducted, and also sought confirmation on whether its inquiry had established whether other contractors working for the firm had also been denied their holiday pay.

The APPG is also seeking clarification about reports that the FCSA rolled back a proposed change to its code of conduct that would have prohibited its members from retaining any holiday pay accrued by contractors because one of its members had threatened legal action if the change was introduced.

In a statement to Computer Weekly, Bryce hit back at the APPG’s claims that the FCSA had not responded to its letters, and said the organisation responded to the Group’s latest letter on the morning of Monday 18 July 2022.

However, he confirmed that the Association’s reply did not include a response to any of the questions raised by the APPG.

“FCSA has frequently offered to work with the APPG in an open and constructive dialogue to assist, where we can, in achieving a common goal of protecting workers from unfair treatment from any source,” said Bryce.

“However, [the FCSA] do not share the… view that publishing open letters on social media serves the public interest in some way. In keeping with our previous expression of disappointment with this particular tactic, we do not feel it is appropriate to respond to the questions raised in his latest letter, irrespective of any validity they may or may not have, as we have little faith that responses which may contain sensitive or commercially confidential material will remain private.”

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