Help needed: LTD vs PAYE vs Umbrella

TonyPDHM

Hi all,

I'm about to start a new job working for water company reading meters and they only employ for my type of role through an agency. The agency tell me the hourly rate is "£11.93Per Hour LTD or £9.35 + £1.13 (Holiday Pay)" and they have put me in contact with a seperate umbrella company to process my wage slips for me for a charge of £27 a week. I've never had to choose how to be paid before and I don't have a clue what to do.

£27 a week sounds a bit steep to me, especially as I don't know what I'm getting for my money, and I'm not convinced the tax benefits which they'll apparently get for me will make it worth my while. Unfortunately I'm pretty ignorant on the subject of tax, I've always been happy in permanent jobs getting a set amount each month. Now it seems as if I'm being given three different options of how to get paid, and I don't want to make any mistakes and waste a pile of money.

Can anyone clearly highlight the pros and cons of my options please?

Here's some info which might help:
1 - I don't mind having holiday pay added to my hourly rate instead of getting paid holidays
2 - I will be occasionally using my bicycle to carry out my job
3 - I don't plan to spend much on food while out and about working during the day if I can help it (packed lunches most days)
4 - I don't mind doing my own paperwork as long as I have clear and reliable information (from a .gov website for example)

Before it's said again, I'm not "playing at being self employed" I'm taking the only offer of work I have at the moment

Thanks in advance for your time and any help you can offer,
Tony

ps - the umbrella company also says that the £27 a week "also includes £10 million Employers Liability, £5 million Public Liability and up to £2 million Professional Indemnity insurances (depending upon the sector in which you work)"

KiKi

Hiya

If you don't want the hassle of setting yourself up as a limited company and sorting out all the tax / pay / NI that goes with it, there is an umbrella company called Springboard that offers the service for free - this includes all the insurances.

They also offer paid for services if you want to claim expenses; I think it's about £5 per week. They also offer a paid premium service at £10 a week if your expenses are complex (like capital expenditure etc, which you won't have).

You don't need to pay £27 a week! There are lots of umbrella companies to compare out there!

If you go the limited company route you will need to be prepared to be on the payroll, undertake accounts, sort out all the tax, NI, expenses etc of the company itself. It's rarely worth it for one job, and as this will be a contracting role I wouldn't recommend it, unless you a) know what you're doing and b) are going to get significant tax benefits (which seems highly unlikely) or c) plan on managing your own business in the very near future.

HTH
KiKi

Hammyman

Go PAYE. They want you to go Ltd Company or through an umbrella company so they get you to sign away all your rights as an employee for 50p/hr but you'll be worse off after the umbrella company fees. They also get out of paying employers NI which saves them over £1/hr.

KiKi

Hammyman - it seems that the company only employ these roles through an agency as contractors. They're not temp roles, so the agencies insist you work through a limited company. PAYE isn't an option - they just won't take you on.

KiKi

SteProud

Hi Tony

I work for an umbrella company so I'm not impartial but you do tend to get what you pay for and some of the cheaper umbrellas have a very bad reputation. I've posted a link to a couple of umbrella guides below which tell you what to look out for and the types of questions you should ask the umbrella before you sign up.

Whatever happens, if you decide to go down the umbrella route then make sure you have a full contract of employment in place with the umbrella (this means you don't lose your employee rights etc and can legitimiately claim business expenses.) This means that legally the umbrella company becomes your employer and this is very important. You will get full employment rights and access to HR support just as I do sat here in the office.

Anyone offering a free service then you need to ask yourself how they can do this without exposing you to risk. If they are also offering kick backs to the agency then they are on really shaky ground. How can you offer a free service, give recruiters money for referrals and still make a profit? Where is the money coming from?

Also avoid the umbrella company league tables. These are not impartial. They are owned by umbrella companies and you have to pay to be included in the top spots. They are a joke.

Hope that helps, here are those links.

http://www.contracteye.co.uk/umbrella-company.shtml

KiKi

SteProud wrote: »

Anyone offering a free service then you need to ask yourself how they can do this without exposing you to risk. If they are also offering kick backs to the agency then they are on really shaky ground. How can you offer a free service, give recruiters money for referrals and still make a profit? Where is the money coming from?

I used Springboard - the agency got nothing from it, and no referrals were involved. They make money from offering paid services, too. I'm sure they hope the free service will be enough to convince you to take the paid service because you have expenses (it nearly did, but the contract wasn't long enough to make it worth it for me).

It might not make them as much money as it could if it were all paid for, but perhaps not all companies are trying to make a massive profit - they'd rather get the customers.

You might not understand why a company doesn't want to make more profit, but it doesn't make it dodgy, or on 'shaky' ground - nor should you imply that they must be exposing you to risk. They just don't make as much profit as other companies The free service includes insurance and HR / payroll advice. I had no problems with it. No fee to leave them, either.

But the OP should do their own investigation anyway.
KiKi

Russe11

Those that don't charge cream off anything you don't claim or anything they get away with not paying you, the ones that do charge do so because they can(agency stipulates) and it kickbacks galore.

Russe11

lets say your a small limited company offering payroll services, just 100 customers on your books is £2700 revenue thats with out all the extras.

SteProud

KiKi wrote: »

I used Springboard - the agency got nothing from it, and no referrals were involved. They make money from offering paid services, too. I'm sure they hope the free service will be enough to convince you to take the paid service because you have expenses (it nearly did, but the contract wasn't long enough to make it worth it for me).

It might not make them as much money as it could if it were all paid for, but perhaps not all companies are trying to make a massive profit - they'd rather get the customers.

You might not understand why a company doesn't want to make more profit, but it doesn't make it dodgy, or on 'shaky' ground - nor should you imply that they must be exposing you to risk. They just don't make as much profit as other companies The free service includes insurance and HR / payroll advice. I had no problems with it. No fee to leave them, either.

But the OP should do their own investigation anyway.
KiKi

Hi kiki, its not that at all.

We have 9,000 contractors working via our umbrella at the moment who all need paying on time and we have an obligation to make sure that happens accurately, compliantly and on time with all the relevant tax and NI deducted. To do this we run four payrolls everyday and all the money that comes into the business goes out on the same day. We only pay the contractor once their invoice has been paid to us. We have a pot of money set aside that is called crown money. This is the money that is owed to the tax man and because of the way we work, we know that we always have the money available to pay the contractor and pay the tax man. This pot is in the millions.

What some umbrella companies do is rely on an overdraft or business finance facility to meet these requirement, effectively using one debt to pay off another. And we all know the financial house of cards that can cause.As a result of this, a lot of umbrella companies that have been poorly run get in difficulty and go bust, dissapearing over night. Contractors don't get paid, agencies have to pay again and the end hirer has allsorts of trouble.

Sometimes the straw that has broken the camels back is umbrellas making unrealistic promises they can't afford. Such as a free service. They are also giving agents a kick back. So, if your sevice is free how can you afford to offer the service, incentivise agents, have the correct funds available to for the tax man etc, without putting everyone at risk in the supply chain?

have a look at this

http://forums.contractoruk.com/accounting-legal/39181-sunday-solutions-anyone-else-having-problem.html

SteProud

KiKi wrote: »

I used Springboard - the agency got nothing from it, and no referrals were involved. They make money from offering paid services, too. I'm sure they hope the free service will be enough to convince you to take the paid service because you have expenses (it nearly did, but the contract wasn't long enough to make it worth it for me).

It might not make them as much money as it could if it were all paid for, but perhaps not all companies are trying to make a massive profit - they'd rather get the customers.

You might not understand why a company doesn't want to make more profit, but it doesn't make it dodgy, or on 'shaky' ground - nor should you imply that they must be exposing you to risk. They just don't make as much profit as other companies The free service includes insurance and HR / payroll advice. I had no problems with it. No fee to leave them, either.

But the OP should do their own investigation anyway.
KiKi

Springboard is actually owned by a recruitment agency as well.

SteProud

Russe11 wrote: »

Those that don't charge cream off anything you don't claim or anything they get away with not paying you, the ones that do charge do so because they can(agency stipulates) and it kickbacks galore.

Kick backs are illegal under the bribery act and you can't be a member of the FCSA (the big industry body) if you operate like this.