Dear Contractor Doctor
I am an IT contractor working for an agency via an umbrella company. I recently attended my first antenatal appointment and have just been paid for the week when I took time off. However, to my surprise, instead of being paid the £14.01 per hour that the agency is paying my umbrella company, I was only paid national minimum wage (NMW) of £6.19 per hour.
My umbrella company said I was only guaranteed to be paid the minimum wage, and the balance of my pay to my £14.01 hourly rate shows as a bonus on my payslip. I thought the law required my employer to pay me for antenatal appointments, and I’m worried how this might affect my maternity pay.
How much should my umbrella company pay me for attending antenatal appointments?
Contractor Doctor says:
“Linda is correct that, as an employee of her umbrella company, employment legislation requires that she should be paid for attending antenatal appointments,” explains Derek Kelly, managing director of professional employment solutions provider Parasol.
“There are three issues facing Linda: firstly, the basis on which her pay for attending antenatal appointments is calculated; second, the treatment of her gross pay as a combination of basic pay and bonus; and third, the basis on which her maternity pay will be calculated.”
The rules about pay for antenatal appointments
According to Kelly, pregnant contractors who are employees have a legal right to be paid for attending antenatal appointments, and a compliant umbrella company cannot choose whether or not to pay the contractor.
“The key point is that employees are paid for the duration of the appointment at their basic rate of pay, which for most umbrella company contractors is national minimum wage,” continues Kelly. “In practice, because contractors can be working on contracts a long way from their local hospital or clinic, this means the contractor will receive pay for the appointment with reasonable travel time either side.”
Employees have a legal right to be paid for attending antenatal appointments, and a compliant umbrella company cannot choose whether or not to pay the contractor
Derek Kelly, Parasol
However, as pay for antenatal appointments cannot be claimed from the government, nor charged to the agency or client, and is funded out of the umbrella companies’ margins, most umbrella companies draw the line at paying for a full day’s pay.
“A contractor based in Nottingham who is working in Birmingham and then arranges an appointment for the middle of the day should not expect to be paid for the entire time she is not working,” believes Kelly.
Basic pay and bonus/commission on umbrella payslips
Umbrella company contractors are typically paid a basic salary at national minimum wage (NMW). Kelly notes that this is normal industry practice, and protects the umbrella company against the risk of not being paid on time, or at all, if the agency or client goes bust.
“It comes down to what is in the employment contract, which would usually guarantee to pay the contractor a basic salary of NMW regardless of whether the agency pays. And because antenatal appointments are paid for at a contractor’s basic salary, then based on her contract, Linda’s umbrella company is perfectly correct to pay her only NMW for attending the appointment.”
The balance of Linda’s pay up to her £14.01 per hour rate is made up by a ‘bonus’ each month; other umbrella companies may refer to these payments as ‘commission’ or ‘special payments’. But this is not usually paid to contractors attending antenatal appointments.
It is likely that Linda would have electronically ‘signed’ her employment contract as part of the sign-up process, and Kelly urges contractors who believe they don’t have an employment contract to ask their umbrella company for a copy and to confirm when it was ‘signed’.
Maternity pay calculations are different to antenatal appointments
“When calculating maternity pay, you look at earnings that are defined as including NMW, bonuses, commission and overtime,” says Kelly. “However, earnings for the purposes of calculating maternity pay do not include expenses, or dividends.”
Pay is calculated based on the average earnings for the relevant period, which is either eight weeks if paid weekly or two months if paid monthly before the qualifying week. The qualifying week is week 25 of the pregnancy.
“At week 25 of her pregnancy, Linda’s umbrella company will look at what she has earned in the preceding eight weeks or two months, and that’s what it will base her maternity pay on.”
Maternity pay pitfalls
Although this is potentially much more encouraging than basing maternity pay on just NMW, as Linda’s ‘bonus’, or full hourly rate will be taken into consideration, Kelly warns of some pitfalls in the calculation.
“Contractors’ earnings can fluctuate considerably, and in the case of maternity pay, not always to their benefit. If a pregnant contractor has not been working on well-paid contracts, or possibly at all, in the eight weeks preceding week 25, then her maternity pay will suffer as a result.”
Kelly suggests that the same can happen if a pregnant contractor falls behind in her expenses in the run up to week 25: “A contractor may submit a major expenses claim at the end of one of the two months before week 25. Although her gross income will be unaffected, expenses are not included as earnings for the purposes of the maternity pay calculation.”
As with antenatal classes, umbrella companies must pay their contractors maternity pay, although they can claim back 92% of what they pay the contractor from the government. The remaining 8% is a cost that must be borne by the umbrella company, paid for out of its margin, as with antenatal classes pay.
“On a final point,” Kelly concludes, “Linda should ensure that her umbrella company conducts a risk assessment at her place of work, which is also a requirement of health and safety legislation.”