Help needed: LTD vs PAYE vs Umbrella

scheming_gypsy

or holiday pay, sick pay, wages for somebody to do the payroll and all sorts of other stuff. They just pay the invoice that the agency send them

SteProud

scheming_gypsy wrote: »

or holiday pay, sick pay, wages for somebody to do the payroll and all sorts of other stuff. They just pay the invoice that the agency send them

agreed but the agency or umbrella, if they have a proper contract of employment in place as they should, should provide statutory sick pay etc.

TonyPDHM

I just took a 7 minute call from the £27 a week umbrella company representative, and they definitely helped me make up my mind.

There is NO WAY I'll be using them.

That was some serious pressure selling! Rapid fire talking, telling me how much I'll be missing out on, telling me that I'd be silly to turn down a "higher rate of pay", telling me that everyone else is doing it, telling me that I shouldn't worry about providing receipts expenses I don't actually have...

The worst bit was that she couldn't see my point that comparing take home of £280 on PAYE vs take home of £306 via her umbrella was not comparing like for like as one has paid holidays and one doesn't. All she kept saying was "Yes, but you get to choose what to do with that holiday pay instead".

I get the principle (now), but what she's offereing really doesn't seem to be worth £1404 a year to me...

TonyPDHM

SteProud wrote: »

Agency PAYE is absolutley fine and sounds like a decent option for you. Just make sure they have the proper insurance in place. Employers' Liability etc.

Thanks for that, I'll make sure with the agency that they have what I'll need. I actually called up my line manager at the water company and asked for his advice on the options I'd been given. He also said he didn't think there was enough in expenses to make up for the fees of an umbrella, and to make sure that I wouldn't have to shell out for insurance myself if I went with them.

At the time I took that to mean that he knew the agency themselves had the correct insurance, but now I'll check it to be sure.

Cheers,
Tony

TonyPDHM

SteProud wrote: »

One last little point. A piece of legislation comes in in October called the Agency Workers Regulations and this might mean your agency will be forced to send you down the umbrella route anyway.

That is very interesting...

I'm currently working for a local authority and my last day is tomorrow. I've been with them for 3 years via an agency and they always promised I'd get a shot at the permanent role when it came up and that they would be recruiting imminently (before I applied, during the interview, after the first few weeks, after the first few months etc. etc. etc.).

They strung me along all this time, and I took it all because I wanted the extra 10K a year for doing the job and all the (many) benefits I would get as a permanent employee.

Well, it didn't work out that way.

With the council cut backs permanent employees who've been doing less critical (some would say pointless) jobs have been made redundant, and instead of paying out the redundancy the council are redeploying them into vacant posts. Vacant posts like mine.

So I'm out on my ear after enduring doing a three years of a stressful £28k job for £18k and no benefits or security.

Anyway, my point was that I was gutted that the legislation you mentioned wasn't coming in sooner as I'd assumed it would help protect agency workers from this kind of abuse... Was I wrong? Have the morally challenged of this world already found a way around it?

SteProud

TonyPDHM wrote: »

I just took a 7 minute call from the £27 a week umbrella company representative, and they definitely helped me make up my mind.

There is NO WAY I'll be using them.

That was some serious pressure selling! Rapid fire talking, telling me how much I'll be missing out on, telling me that I'd be silly to turn down a "higher rate of pay", telling me that everyone else is doing it, telling me that I shouldn't worry about providing receipts expenses I don't actually have...

The worst bit was that she couldn't see my point that comparing take home of £280 on PAYE vs take home of £306 via her umbrella was not comparing like for like as one has paid holidays and one doesn't. All she kept saying was "Yes, but you get to choose what to do with that holiday pay instead".

I get the principle (now), but what she's offereing really doesn't seem to be worth £1404 a year to me...

That's seriously bad practice if she is claiming you don't need receipts! Some umbrellas claim to have a dispensatioin with HMRC. All this means is that they can grant a certain level of expenses and HMRC don't need to see the receipts. Its a way of saving time and admin. You should always keep your receipts regardless of whether or not the umbrella needs to see them. HMRC can ask for them at any time.

SteProud

TonyPDHM wrote: »

That is very interesting...

I'm currently working for a local authority and my last day is tomorrow. I've been with them for 3 years via an agency and they always promised I'd get a shot at the permanent role when it came up and that they would be recruiting imminently (before I applied, during the interview, after the first few weeks, after the first few months etc. etc. etc.).

They strung me along all this time, and I took it all because I wanted the extra 10K a year for doing the job and all the (many) benefits I would get as a permanent employee.

Well, it didn't work out that way.

With the council cut backs permanent employees who've been doing less critical (some would say pointless) jobs have been made redundant, and instead of paying out the redundancy the council are redeploying them into vacant posts. Vacant posts like mine.

So I'm out on my ear after enduring doing a three years of a stressful £28k job for £18k and no benefits or security.

Anyway, my point was that I was gutted that the legislation you mentioned wasn't coming in sooner as I'd assumed it would help protect agency workers from this kind of abuse... Was I wrong? Have the morally challenged of this world already found a way around it?

you are absolutley correct, that it exactly what the AWR is looking to protect workers from. In a nutshell, after 1st october, all agency workers are entitled to the same pay and conditions as a permie after 12 weeks. More info for the interested at www.understandingawr.co.uk

TonyPDHM

SteProud wrote: »

you are absolutley correct, that it exactly what the AWR is looking to protect workers from. In a nutshell, after 1st october, all agency workers are entitled to the same pay and conditions as a permie after 12 weeks. More info for the interested at www.understandingawr.co.uk

I get that the AWR is designed to protect workers from situations like mine, but by your previous comment I thought you were saying that because of the AWR agencies might be forced to stop PAYE deals for their workers and adopt an umbrella only policy. I took that to mean that the umbrella deals would be more attractive to companies after AWR because they would still allow lower pay rates.

Maybe that's just the pessamistic side of me jumping the gun, but I think I can be excused a little pessamism after having the pess taken out of me for so long

SteProud

TonyPDHM wrote: »

I get that the AWR is designed to protect workers from situations like mine, but by your previous comment I thought you were saying that because of the AWR agencies might be forced to stop PAYE deals for their workers and adopt an umbrella only policy. I took that to mean that the umbrella deals would be more attractive to companies after AWR because they would still allow lower pay rates.

Maybe that's just the pessamistic side of me jumping the gun, but I think I can be excused a little pessamism after having the pess taken out of me for so long

The regulations are quite far reaching so it would be hard to avoid them in that way and the unions are all over this. It's likely that there will be a number of test cases which will set precident.

The majority of the contractors we work with are specialised workers who are paid an average of £34 an hour and are typically paid more then a permie anyway so aren't bothered by the AWR. As they are legally our employees its our responsibility to make sure we are working within the legislation so we will be doing things like paying them inbetween assignments etc so that we aren't caught out of the legislation, niether is the agency or the hirer.

Hammyman

TonyPDHM wrote: »

Hmmm, I'd better check with my mate who's using the umbrella company then. I'm not sure he knows he's supposed to pay NI himself.

The Umbrella company may already be deducting it before they pay him but he will be paying employers NI. In short, basically your deductions are around 11% of your tax free portion of your wages to cover the holiday pay and then once you reach the NI threshold that goes up to 37% as employers and employees NI and holiday pay is now being deducted and then once you get to the part of your weekly pay where income tax is due, that then goes up another 20%.

So basically once you get above £143.75 a week, you have deducted:
20% income tax
11% employee NI
12.8% employers NI
11% holiday pay.
So for every £1 you earn above £143.75, 54.8p per £1 is deducted to cover income tax, NI, employers NI and holiday pay. Had you been on PAYE, you'd only have had 31p per £1 deducted.

All of a sudden, that extra £1-£1.50/hr you get above the PAYE rate doesn't look that good, especially when for someone on £10 an hour on PAYE, an extra £1/hr they offer "self employed" doesn't even cover statutory holiday pay let alone the 12.8% employers NI you're now paying in addition to the umbrella company fees. Sure you can claim expenses but unless you claim around 1/3 of what you earn, its not worthwhile and as I said, many temps at agencies can already claim the main expense, travel to work, anyway via a P87 Expenses in Employment as they do not have a permanent place of work and are not there longer than the HMRC limit for qualifying which OTTOMH is 24 months..

AND BEAR IN MIND NONE OF THE ABOVE TAKES INTO ACCOUNT THE UMBRELLA COMPANY FEES WHERE YOU WOULD BE CHARGED THAT £27 WHETHER YOU EARNED £30 THAT WEEK OR £300. In fact for someone on £10/hr using an umbrella company charging £27 a week who only manages to do one 8hr shift that week, they'd be handing over nearly 50% of that weeks income to the umbrella company for £5 worth of admin.

The only people who win are the agency and the umbrella companies. Its certainly not the person doing the graft.