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Businesses warned over backdated holiday claims from contractors
Posted Aug 4, 2009
Businesses are being urged to ensure that any self-employed contractors they hire cannot be classified as "workers" following an House of Lords ruling which enables workers to claim backdated holiday pay.
In the recent HMRC vs Stringer case, the House of Lords ruled that workers can in fact accrue paid holiday for their entire sick leave and are entitled to take it on their return or be paid in lieu if their employment ends.
Danbro, the contractor accountants, point out that this ruling potentially leaves many businesses exposed to back-dated holiday claims, which may run into thousands of pounds.
Of course, IT contractors who have been working via limited companies or umbrella schemes should not be a concern to employers.
However, other contractors who have been hired as sole traders, PAYE via an agency, or otherwise, may well be classed as "workers", and as such would be entitled to holiday pay and other employee-type benefits.
Danbro's Gerry Gregoire commented:
"Now more than ever, any company employing self-employed contractors needs to ensure that they cannot be classified as workers.
"In these times of uncertainty where businesses are trying to focus their efforts on surviving one of the most deep rooted recessions on record, they will find that by effectively managing their payroll, they can remove the risk of their self-employed contractors being deemed as workers. This effectively would prevent them, from being able to take further accrued annual leave after long periods of sickness among other employee benefits.
Decision a "damp squib"
Some legal experts have referred to the Lords decision as a "damp squib", which leaves many questions unanswered over the issue of accruing annual leave during periods of sick leave for workers.
You can find out more from Mace & Jones, and Management Today.
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