Umbrella Company Frauding My Daughter?

Spiketrain

My daughter got employed to do a catering job for an agency.

She was attracted by the hourly rate (£10.75) and, because of her experience and CV was accepted for the job over the phone. Then in a kind of 'bait and switch' move she was told that she would be working for another company and that they would call her. This turned out to be an umbrella 'payment solutions' firm that the agency were outsourcing their pay / tax/ employer contractual requirements to.

This was never sorted by the employer prior to the contact date so, in the meantime, my daughter did the job - which went ok.

Afterwards she received what she was told was a recorded conversation with the umbrella company (not sure if I'm permitted to tell you who they are here). She was then digitally sent a contract which, by clicking somewhere on a webform became a signed legal document - she wouldn't get paid without doing these things of course.

Then she got paid. Her hourly rate was listed on the pay advice slip, but there were a series of unexpected deductions.

She was taxed at basic rate, charged a 'margin' fee and also an 'apprentice levy'

I phoned the umbrella company to enquire. I was told that, because my daughter had declared that she sometimes worked for another catering agency, she was subject to paying basic rate tax even though she is WAY below the threshold for doing so. We would need to contact the HMRC if we had a problem with this.

The Margin cost was a 'retention' on behalf of the 'client'. There was no data pertaining to the legitimacy of the 'apprenticeship levy'. I asked to have this money refunded to my daughter and was told that she had agreed to it during the recorded phone conversation. I asked for a copy of this recording and the agent refused. I was told that a manager would call me. This never happened.

I then found the contract and read it through to check what was going on... there was no mention at all of any margin or apprenticeship levy in the document.

On contacting the HMRC we were told that the employer (assuming the umbrella firm) should have issued my daughter with a 'new starter declaration form' which would enable her to declare both agencies for tax purposes. It wasn't clear how she could get rebate for the amount she'd already paid.

So in summary, it appears my daughter has been stitched up - but by legit companies.

• She agreed to work for one firm then found herself working for another
• She signed the contract after the work was completed
• She was then charged for things that weren't mentioned in the contract

It seems the agency outsource the employment admin to an umbrella firm who charge the employee for the service. IE My daughter had to pay the cost of getting paid!

This feels all kinds of wrong to me - anyone able to shed light on this practice? (and sorry for lengthy description, I couldn't think of a briefer way to put this!)

El_Torro

Plenty of people work via umbrella companies, I've done it myself. From what you say it sounds like your daughter agreed to use the umbrella company before taking up the work so I don't think there's any grounds to complain about this.


It also looks like she paid emergency tax on this employment. This is a pain but this does happen to a lot of people. She will be able to get the overpaid tax back, one way or the other.


As for the margin fee and apprenticeship levy, this does sound fishy. You say she was quoted £10.75 per hour, how much did she end up getting, before tax but after these "fees"? If it's above the legal minimum then maybe there was no wrong doing. The umbrella company says she agreed to these fees so it's their word against hers at this stage. Do you really want to pursue it further? How much money are we talking about?



When I worked for an Umbrella company (this was a few years ago) I paid £20 a week out of my wages to the Umbrella company for their admin. Maybe this is the margin fee they're talking about.


Did she pay National Insurance for this work? When you work for an umbrella company not only do you pay the employee's National Insurance, you also pay the Employer's NI.

JCS1

Apprentice Levy is an employer cost, so if she is also being charged Employer NI it would make sense.

Spiketrain

Thanks for such a quick and thorough reply! - I'm really grateful.

I think I'm on to something here.

First of all my daughter didn't agree to this umbrella firm in advance of doing the job and knew nothing about it. This though, of course, is not the umbrella firm's fault but the agency that were not clear. I think a call to them to explain that they need to be more informative of what's happening is in order here - especially as it has financial ramifications on the employee - I shall see to this separately.

My daughter is a student and the rate of tax was listed as Basic Rate (rather than emergency). She’s young and earns very little indeed and is struggling to make rent so it’s very disappointing when she’s taken advantage of by large corporations.

The taxation part of this happened when she declared on the umbrella co form that she still accepted work from another agency (which use her occasionally) and this seemed to have put her in a different bracket - according to the umbrella co. If she has ‘another job’ then she (apparently) has to pay BR tax. NB She doesn’t really have another ‘job’ per se, she’s just employed ad hoc with another catering firm the odd day a month. But in any case, that’s what she declared to the umbrella firm since it sounded honest and correct to say that she was on someone else’s books.

The HMRC didn’t fully clarify this to us when we enquired, but they seemed to say that she can have as many employers as she likes provided she fills in a New Starter Application - this then monitors her income across employers… I think! - In any case, the umbrella firm, her new employers, who are experts in employment, didn’t issue her with such a document, they just hit her with BR and with no explanation how to apply for rebate. I would consider this an oversight - and of course an enormous butt pain to find out how to get this back. Surely any umbrella company with huge employment experience would have avoided this whole BR tax thing from the start?

The money involved here is just for 1 x 10 hour shift…. so I’m gunning for the principal rather than the actual figure.

Here’s how the payslip breaks down:

Total income - £107.50
She is then deducted £11 ‘margin’ and £0.48 ‘apprentice levy’
The remaining £96.02 then has £10.34 set aside as ‘holiday pay’ and is then taxed £19.20 on the remaining £85.68. In her pocket (after a ludicrous day of utter stupidity that I won’t go into) she got £76.82. This is £30.68 short of what she was expecting.

Interestingly she was charged absolutely no NI at all, despite all the warnings I read about paying both employer AND employee figures. So that was odd - but perhaps welcome under the circumstances.

The holiday pay thing was confusing to me, and perhaps not worth picking up on… but the contract said she would receive holiday pay at 12.07% - but they seem to have worked that out of the total rather than adding it to her hour rate. In other words her £10.75 an hour was inclusive of a holiday allowance thing - but the contract didn’t really say that.

You mention that it’s their word against ours - but actually not really. The only thing she signed was the contract, and there is no mention of the apprentice levy or the margin fee at all. In fact the contract is wooly at best, which is surprising for a big company specialising in this. So we don’t need to fight them over sneaky small print… they charged my daughter for things they themselves don’t even bother to mention! A recorded phone conversation can not be considered a codicil to the contract surely. There’s no mention of this being the case in writing either.

I’m ready to take this further and might escalate using all powers available to me. Again, it’s the principal here, and I was very successful the last time I sued someone - though it always seems to take a year and a lot of patience.

I’m all about the little guy…. (or girl as it is with my daughter) - I just hate to see big companies make their fees in sneaky ways off those on minimal wage.

If the agency want to 'off shore’ their employment admin to an umbrella firm, then it’s them who should pay for it. If my daughter had approached the umbrella firm directly then I do understand that things would have been different if they were supplying my daughter a service that she wanted to have managed.

The way I see it, this is fraudulent behaviour since everything my daughter was subjected to was not agreed in writing anywhere. When you’re expecting £107.50 and end up with £76.82 that’s a big wedge difference… and did I mention, she had a really horrible day too!

Spiketrain

Hmmm - don't understand what you mean here sorry! - What actually is an 'apprentice levy' and why is she paying an 'employer cost'? - For some reason she was charged no NI at all.

Looking on the HMRC website, it seems to say that some employers (less than 2% of UK employers) pay this to cover the costs of new apprenticeships. Working as bar staff for one day on a windy racecourse (which is what my daughter did) doesn't really connect with me in any way on this topic as you'd imagine!

My daughter paid a tax to cover the costs of training apprentices? Really!? I have so much to learn about employment law clearly.

El_Torro

Spiketrain wrote: »

Thanks for such a quick and thorough reply! - I'm really grateful.


I think I'm on to something here.

I appreciate that you're looking out for your daughter, though I'm not sure it's going to be worth the effort for you. Especially since it's not clear whether the umbrella company (or even the catering company) have done anything wrong.


If the catering company sold her on the idea of getting £10.75 per hour net without an umbrella company being involved then yes, you could argue they were being deceitful, though not necessarily unlawful.


I'll try to tackle your reply piecemeal as it's even longer than your initial post

Spiketrain wrote: »

My daughter is a student and the rate of tax was listed as Basic Rate (rather than emergency). She’s young and earns very little indeed and is struggling to make rent so it’s very disappointing when she’s taken advantage of by large corporations.

The taxation part of this happened when she declared on the umbrella co form that she still accepted work from another agency (which use her occasionally) and this seemed to have put her in a different bracket - according to the umbrella co. If she has ‘another job’ then she (apparently) has to pay BR tax. NB She doesn’t really have another ‘job’ per se, she’s just employed ad hoc with another catering firm the odd day a month. But in any case, that’s what she declared to the umbrella firm since it sounded honest and correct to say that she was on someone else’s books.

The HMRC didn’t fully clarify this to us when we enquired, but they seemed to say that she can have as many employers as she likes provided she fills in a New Starter Application - this then monitors her income across employers… I think! - In any case, the umbrella firm, her new employers, who are experts in employment, didn’t issue her with such a document, they just hit her with BR and with no explanation how to apply for rebate. I would consider this an oversight - and of course an enormous butt pain to find out how to get this back. Surely any umbrella company with huge employment experience would have avoided this whole BR tax thing from the start?

OK. My point in my previous post though was that if she paid income tax incorrectly then HMRC will refund it, the money's not lost. I would ring them about this specific point as they should be able to give a clear answer on how to get a refund. Worst case scenario is that she'll have to wait until the end of the tax year to get it back.


Yes, she shouldn't have overpaid tax in the first place. It happens though and it's not clear who's fault it is, the umbrella company or her. Even if it is the umbrella company's fault I don't think it's worth suing them for £19.20 in overpaid tax (which can be refunded by HMRC).

Spiketrain wrote: »

The money involved here is just for 1 x 10 hour shift…. so I’m gunning for the principal rather than the actual figure.

Here’s how the payslip breaks down:

Total income - £107.50
She is then deducted £11 ‘margin’ and £0.48 ‘apprentice levy’
The remaining £96.02 then has £10.34 set aside as ‘holiday pay’ and is then taxed £19.20 on the remaining £85.68. In her pocket (after a ludicrous day of utter stupidity that I won’t go into) she got £76.82. This is £30.68 short of what she was expecting.

OK, so put it another way, gross pay was £107.50. She then got deducted £11 margin, £0.48 apprentice levy and £19.20 income tax. This equates to £30.68.


Ignore the £10.34 holiday pay, as you can see it wasn't deducted from her net pay. This is basically just a legal thing. She has to be paid holiday pay legally, but it comes out of the gross pay. So she wasn't out of pocket as a result of accruing holiday.


Like I say let's focus on the £30.68 that she did lose:


£19.20 was mistakenly taken as income tax, as I mentioned this can be reclaimed so is not really an issue (other than the hassle of getting it back from HMRC).


£11 margin - I still think this was probably the admin fee from the umbrella company. It's unfortunate that this wasn't made clear to her before taking on the work, though the fee is understandable. The agreement was a gross pay of £10.75 per hour (which the catering company honoured) and it's the employee's responsibility to pay the umbrella company's admin charge.


£0.48 apprentice levy - This is what I have a hard time justifying. I don't know the legalities of whether an umbrella company can charge for this, I suspect they can if it was done in this instance. Even if it isn't legal how much of a fuss can you kick up over 48 pence?

Spiketrain wrote: »

Interestingly she was charged absolutely no NI at all, despite all the warnings I read about paying both employer AND employee figures. So that was odd - but perhaps welcome under the circumstances.

I think the reason for not charging her NI was because an employee needs to earn a minimum amount of income in a week to pay NI and she didn't earn that minimum. So it looks like the umbrella company were right not to charge. This works in her favour too as you say.

Spiketrain wrote: »

The holiday pay thing was confusing to me, and perhaps not worth picking up on… but the contract said she would receive holiday pay at 12.07% - but they seem to have worked that out of the total rather than adding it to her hour rate. In other words her £10.75 an hour was inclusive of a holiday allowance thing - but the contract didn’t really say that.

If she was paid by an agency then the agency would have to accrue holiday for her as she would be legally entitled to paid time off. When employed by an umbrella company it doesn't work that way though, as I tried to explain above.

Spiketrain wrote: »

You mention that it’s their word against ours - but actually not really. The only thing she signed was the contract, and there is no mention of the apprentice levy or the margin fee at all. In fact the contract is wooly at best, which is surprising for a big company specialising in this. So we don’t need to fight them over sneaky small print… they charged my daughter for things they themselves don’t even bother to mention! A recorded phone conversation can not be considered a codicil to the contract surely. There’s no mention of this being the case in writing either.

I'm no lawyer but I think if she agreed to it on the phone then they are OK in charging her. It surprises me that the charges aren't clear in the contract.

Spiketrain wrote: »

I’m ready to take this further and might escalate using all powers available to me. Again, it’s the principal here, and I was very successful the last time I sued someone - though it always seems to take a year and a lot of patience.

I’m all about the little guy…. (or girl as it is with my daughter) - I just hate to see big companies make their fees in sneaky ways off those on minimal wage.

I would take this as a life lesson for your daughter. She now has a better idea of what it means to work through an umbrella company. I'm not saying that her employer(s) did nothing wrong, I'm just not sure it's worth the effort to fight this. The risk of losing the fight is high in my belief too.

Spiketrain wrote: »

If the agency want to 'off shore’ their employment admin to an umbrella firm, then it’s them who should pay for it. If my daughter had approached the umbrella firm directly then I do understand that things would have been different if they were supplying my daughter a service that she wanted to have managed.

The way I see it, this is fraudulent behaviour since everything my daughter was subjected to was not agreed in writing anywhere. When you’re expecting £107.50 and end up with £76.82 that’s a big wedge difference… and did I mention, she had a really horrible day too!

You make some good points, though sadly the law is not on your side on this one.


The only people I know who use / have used umbrella companies are contractors who don't think they're going to be contracting for long so use an umbrella company instead of setting up a Limited Company to pay themselves through. This is the situation I was in when I used an umbrella company.


In your daughter's situation using an employment agency is preferable to using an umbrella company, though I imagine you've figured that out by now We don't always have a choice in such matters unfortunately, sometimes we have to choose between using an umbrella company or not getting the work at all.

Marcon

There's a huge amount of confusion and misinformation about umbrella companies. One of the best guides going is produced by the Low Incomes Tax Reform Group. See https://www.litrg.org.uk/ and click on 'Umbrella Companies' (third heading under 'Popular LInks' on the right hand side of that web page - I can't give a direct link because it is a download).

Instead of posting lengthy chunks of text, why not let your daughter have a go at sorting out her own problems? She would learn a huge amount and you'd have a lot more free time! She'll never learn if you don't let her grow up and tackle things for herself (and the comment is meant in the kindest way possible).

chrisbur

El_Torro wrote: »

I think the reason for not charging her NI was because an employee needs to earn a minimum amount of income in a week to pay NI and she didn't earn that minimum. So it looks like the umbrella company were right not to charge. This works in her favour too as you say.

Yes the current figure is £166

Potbellypig

Some things are worth fighting. Some aren't. Crack on with life.

Marcon

Potbellypig wrote: »

Some things are worth fighting. Some aren't. Crack on with life.

Understanding something is normally worth doing, particularly if it's likely to crop up again.

unforeseen

If she has ‘another job’ then she (apparently) has to pay BR tax. NB She doesn’t really have another ‘job’ per se, she’s just employed ad hoc with another catering firm the odd day a month. But in any case, that’s what she declared to the umbrella firm since it sounded honest and correct to say that she was on someone else’s books.

This why she was taxed BR. If she was registered with another firm then at that point all her tax allowance is against that job. The umbrella cannot get HMRC to split the tax codes across JOB. . That needs to be done by your daughter.