Umbrella Schemes

Notmyrealname

Russe11 wrote: »

I've just done the calculation, working £8 per hour under a umbrella company with £24 a week charge work out at...

£2.25 per week more than a NMW 37.5 hour week.

So the employer (agency) has to pay no employers NI, gets a back hander or even owns the umbrella taking the fee and the worker gets £2.25 a week more for the "scam".

Umbrella arrangements are not suitable for low paid workers.

I bet you've not also deducted the amount for employers NI and holiday pay that the umbrella company would deduct from what the agency workers gross pay is from the agency.

You'll need to knock off roughly another 20%.

Uncertain

Notmyrealname wrote: »

Set up your own Ltd Company. Employment agencies that use umbrella companies pretty much all accept drivers who are set up as their own Ltd Company. Some will accept you if you're a sole trader but not many.

Well yes in most cases becoming a limited company gets round the self employed / employee issue.

As I have said before there are a variety of perfectly legal ways round this issue if both parties work together (some highly paid BBC "names" have been in the news recently for doing just that).

It is really quite surprising how widespread this is in certain fields where 99% of the public would just assume the "staff" to be employees.

Equally there are dodgy scams as well but at least the onus is very much on the "employer" to get it right and not the individual.

kennyfong

An umbrella company is basically an intermediary. They receive money from a third party that is paying at a contractual rate [e.g. £70 per day]. They then administer pay to you as if you were a PAYE employee.

Limited company is the way to go. What you/he should do is form a Ltd company, then bill the agency directly instead of going through the umbrella company.

You'll gain the ability to charge VAT [which you can keep a portion of by enrolling in a flat rate VAT scheme]. You also won't get your employers NI and holiday pay deducted 'cos you're not PAYE.

In my experience you get about 55%-65% of the gross pay if you go through an umbrella company.

Ltd co. may sound complicated, but it's not - you can get all the administration done for you by a professional for £40 [or even cheaper if you DIY]

Russe11

Notmyrealname wrote: »

I bet you've not also deducted the amount for employers NI and holiday pay that the umbrella company would deduct from what the agency workers gross pay is from the agency.

You'll need to knock off roughly another 20%.

You lose the bet...

I did £8 x 37.5 basic week less the £24 admin fee.

Leaving £7.36 an hour

Total cost per hour
£7.36

Gross % increase
18%
Agency Salary per week
£234
(rate x hours)
Agency Salary per annum
£12,168.00
(x 52 weeks PAID)
Employers' NIC per annum
£645.84


Total Salary Costs per annum
£12,813.84


Gross cost per week
£276.16
( / 46.40 weeks WORKED)
Gross cost per hour
£7.36( / hours)


So thats 5p per hour more than the NMW

keyser666

kennyfong wrote: »

An umbrella company is basically an intermediary. They receive money from a third party that is paying at a contractual rate [e.g. £70 per day]. They then administer pay to you as if you were a PAYE employee.

Limited company is the way to go. What you/he should do is form a Ltd company, then bill the agency directly instead of going through the umbrella company.

You'll gain the ability to charge VAT [which you can keep a portion of by enrolling in a flat rate VAT scheme]. You also won't get your employers NI and holiday pay deducted 'cos you're not PAYE.

In my experience you get about 55%-65% of the gross pay if you go through an umbrella company.

Ltd co. may sound complicated, but it's not - you can get all the administration done for you by a professional for £40 [or even cheaper if you DIY]

Not true, I have used umbrella companies before and never had a problem. I would get upto 93% of my gross invoice paying the umbrella company 4% of my gross invoice as a fee.

Russe11

keyser666 wrote: »

Not true, I have used umbrella companies before and never had a problem. I would get upto 93% of my gross invoice paying the umbrella company 4% of my gross invoice as a fee.

the problem arises there when you wage has been calculated using expenses by means of dispensation, where there is no record kept of you costs its just made up based on nothing more than a guestimation.

The chances are slim but should you be investigated the individual is liable for providing the receipts and figures, but if you hae passed these on to the umbrella company then where do you go.

When this happens the umbrella folds and a new one opened.

keyser666

Russe11 wrote: »

the problem arises there when you wage has been calculated using expenses by means of dispensation, where there is no record kept of you costs its just made up based on nothing more than a guestimation.

The chances are slim but should you be investigated the individual is liable for providing the receipts and figures, but if you hae passed these on to the umbrella company then where do you go.

When this happens the umbrella folds and a new one opened.

No not at all. There are two ways, some take the standard full amount available to them to claim without having to provide receipts or the other is to use an offshore umbrella agency where nothing needs to be submitted

HalNico

As a longtime short term contractor I've used both limited companies and now online Umbrella companies.If you have come from a work history of PAYE it can be a bit scary to understand being,"Self Employed" and doing short term work.
Online Umbrella companies are an easy and decent option for being paid for short term,short contract work or even longer term work outside the normal PAYE system.I'm not promoting any particular one but one I do use and like is called,"Paysure".I've never had a problem with them(Google them) but there others around as well.I like them as I can do the small expenses claims like daily food and fuel allowances online instead of having to fill in a weekly expenses sheet.
You will see more of your pay than if you were on the same rate PAYE but you don't have any sick pay etc or dismissal protection as PAYE as such but that's the nature of the beast.
It would be nice if we could all have decently paid secure PAYE jobs but this is not always possible so if you want to work and the rate is usable don't fear using an,"Umbrella" company.You work,you get paid and your Tax and NI are taken care of.I've even had tax rebates all totally legal and above board and when the contracts have finished have had no problem signing back onto JSA whilst I look for other work.I've also still legally been allowed to claim Working Tax Credits" where applicable.

All the main online Umbrella companies have to be registered with and have a good relationship with HM revenue and taxes.

HTH

directdebiter

Hi
I have used an umbrella company in the past. Its definitely not something to be weary of and allo legitimate (as long as you use an established company). Its just a way for contrctors to get paid. Limited company is worthwhile at a much higher rate of pay so forget that. The admin charge of the umbrella company is fair enough and they look after your tax obligations. Its like you are an employee of the umbrella company. So dont be scared of using them. The only downside as pointed out above is that £8 is not too high.

FYI often the agency will recommend an umbrella company otherwise I have used Parasol or Contractor Umbrella based in Colchester.
This contracting site has a list of umbrella companies that may be useful
http://www.contractoruk.com/directory/umbrella_companies.html but also lots of great content to explain it to you. HTH.

Notmyrealname

directdebiter wrote: »

Limited company is worthwhile at a much higher rate of pay so forget that. The admin charge of the umbrella company is fair enough and they look after your tax obligations.

Absolute poppycock. Ltd Company is ALWAYS a better option than an umbrella company.

If you do an hours work in a week, the umbrella company will still charge you their flat weekly rate. Doesn't happen with your own Ltd Company.

The amount an umbrella company charges to do the admin is typically three to four times that an accountant would.