Holiday Pay Deduction from Ltd. Co Overtime Rate

Hello all,

I operate through a limited company. I've secured an engagement through an agency working 40 hours per week (core hours). As a contractor I am paid an uplifted hourly rate compared to PAYE workers (reflecting the amount they save in not having to pay NICs or set aside holiday pay). I am paid overtime after 40 hours per week at time and a half. However, the agency have adjusted this rate downwards to deduct the percentage uplift attributable to holiday pay on the basis that holiday pay accrues only in relation to core hours.

My view is that while this is not legally invalid, it is artificial for the agency to say that the downward adjustment is attributable to holiday pay entitlement. Does anybody have any views to share or experience in this respect?

Thanks!