Self-employed holiday pay: what are you entitled to?

One of the drawbacks of being self-employed is the lack of employee benefits, like sick pay and holiday pay. This leads to many small business owners working long hours and not taking regular time off.

But depending on your employment status, you might actually be able to get self-employed holiday entitlement.

Some self-employed people, including contractors and freelancers, could be entitled to self-employed holiday pay if they’re classed as workers or employees. They might be a worker or an employee if they have a contract to do work personally, or work through an agency or umbrella company.

It’s important to take time off regardeless of whether you can access holiday pay. Read on for an overview of the process as well as our tips for managing time off when you run your own business.

The benefits of self-employed holiday pay

Our recent survey of over 700 small business owners has revealed that one in three are feeling the effects of burnout. This is no surprise when one third are working more than 46 hours a week – 10 hours more than the average UK worker.

An overwhelming 73 per cent of small business owners report taking fewer than 20 days of holiday a year. But taking regular time off is important for your health and wellbeing – especially when it comes to managing stress levels.

Are the self-employed entitled to holiday pay?

It depends on the way you work and the type of contract you have with the people you work for.

A huge benefit of being self-employed is freedom – the ability to choose who to work for and when to work. If you work in this way, genuinely running your operation as a business, it’s likely that you’re classed as self-employed legally, too. You’ll have very few employment rights, which means no holiday entitlement.

But some contractors and freelancers might actually be classed as workers or employees depending on their contract and the way they work. In these cases, they’re entitled to holiday pay.

Workers – unlike self-employed people who are contracted to provide services for a customer or client, workers are people contracted to do work personally for a company. Workers can include casual workers, agency workers and some freelance workers. The contract will determine employment status. Workers get holiday pay.

Employees – while someone who thinks of themselves as self-employed isn’t likely to be an employee in the traditional sense, they might offer their services through an agency or umbrella company. In that case, they’re an employee of the agency or umbrella company and can get self-employed holiday pay (funded out of the contractor’s pay in the case of umbrella companies and fees in the case of agencies).

What’s my employment status?

It’s important to know your employment status to understand whether you get holiday entitlement.

Our guide to employment status has more information about the differences between workers, employees, and the self-employed.

Self-employed holiday entitlement: what do I get?

You’ve looked at your contract and the way you work and you think you have self-employed holiday pay rights. So, what are you entitled to?

Workers and employees get a minimum of 5.6 weeks’ holiday entitlement. This means most people who work five days a week should get at least 28 days paid leave (this can include bank holidays).

But calculating self-employed holiday pay isn’t straightforward. It’s based on the hours you work and how you’re paid for the hours. For some workers with no fixed hours, holiday pay will be worked out using the worker’s average pay from the previous 52 weeks (only counting weeks in which they were paid).

Agencies and umbrella companies will also calculate holiday pay at 12.07 per cent of your hourly rate. This figure is based on 5.6 weeks (the holiday entitlement) divided by the weeks left over in the year (which is 46.4).

Holiday pay will be clearly noted on your payslip and you’ll receive holiday pay either when you take time off or on a ‘rolled up’ basis, which means weekly or monthly in your pay.

You can find a holiday pay calculator at gov.uk.

How can I take a self-employed holiday?

If you’re classed as self-employed, going on holiday means that you need to put your business out of your mind while you enjoy yourself. This can be worrying – especially if you don’t have other people working for you and you won’t have any money coming in.

A survey we ran in 2019 revealed that nearly one in 10 business owners hadn’t taken a holiday in five years, but taking breaks can help you manage stress.

So, how can you take a self-employed holiday without worrying about work?

Keep money aside – saving can be difficult, especially if you don’t have a regular income. But keeping a pot of money aside for holidays can help you feel more secure when you decide to take one. Otherwise, is there extra work you can take on before your holiday to build a safety net quickly?

Prepare – blocking out time away in advance will help you plan work around your holiday, giving you enough opportunity to let customers and clients know that you’ll be away. You can get important work done before your holiday and de-prioritise other work, picking it up when you get back.

Monitor work while you’re off – even though you’re away, you might not be able to escape work completely. If it gives you peace of mind, spend time each day on phone calls and emails before enjoying yourself – but don’t let 30 minutes become three hours!

Give a thorough handover – if you have employees, make sure they know what to watch out for while you’re off. Otherwise, you might want to bring someone in specifically to keep work ticking over for customers and clients.

When was the last time you took a holiday? Let us know in the comments below.

More guides for small business owners

• Self-employed pensions – what you need to know
• What’s the difference between a sole trader and a limited company?
• Self-employed mortgage: how to get a mortgage when self-employed
• What type of business insurance do I need?

Photograph: Ian/stock.adobe.com