Over the past year or so, a few of our members and their agents have told us about something they’d not experienced before: some employers are paying directors different rates depending on their employment status.
In most cases, this wasn’t about performance or quality — it was simply an administrative policy that doesn’t seem fair.
Same job, different rate
Imagine two directors working on the same TV series — one a sole trader, the other using a personal service company (PSC) — a limited company — because it suits how they manage their other freelance work.
They do the same hours, face the same pressures, and deliver the same creative results. But under some policies, only the sole trader gets paid holiday pay on top of their base rate — while the PSC director doesn’t.
For example:
• Published rate (weekly): £2,500
• Holiday pay: £301.75 (12.07% of £2,500)
Some employers treat this as an optional extra. It’s either…
1.“We pay £2,500, and add holiday pay where we’re legally obliged”, or…
2. “We pay a gross rate of £2,801.75 to everyone, which includes any applicable holiday pay.”
There’s no law forcing employers to take option two — but fairness shouldn’t depend on legal technicalities. Both directors do the same work and need to plan for time off.
In some cases, directors who were planning to work through a PSC switched to contracting as a sole trader and their employers increased their gross rate accordingly. Directors UK has raised our objections to this practice with employers, and to their credit, some of them have agreed with us and changed their policy.
Why this confusion happened
It’s easy to see where this started. The rules on holiday pay have changed several times in recent years.
After the Harpur Trust v Brazel case in 2022, government guidance discouraged “rolled-up” holiday pay — the long-standing film and TV practice of quoting one gross rate that includes it. As a result, some employers stopped including holiday pay altogether for PSC directors.
But in April 2024, new guidance was published allowing rolled-up holiday pay again for anyone on part-year or irregular-hours contracts. That clarity means there’s now no reason not to treat everyone equally. Importantly, contracts and payment notifications should be clear about the holiday portion, and as long as they do that, there can be no question that the holiday payment is being ducked.
Why it matters
In a freelance industry, consistency and transparency on pay are essential. Directors shouldn’t lose out just because they’ve chosen one legitimate business setup over another. Any director trading through a PSC would be within their rights to say “my PSC has a policy of paying holiday pay and it will include a provision of 12.1% on top of the day rate on all invoices. I expect the same gross (including holidays) rate as a sole trader would get for doing the same job.”
Fairness and practicality can — and should — go hand in hand. Any employers who are still not paying PSC directors the same gross fee as sole traders need to change their minds and put fairness first.