Umbrella Company margins 25 April 2022 at 3:30PM in Employment, jobseeking & training 9 replies 305 views

eskimalita7

Hello all
Would anybody mind sharing the margin their umbrella company takes?
Mine is taking a fixed £158 per month and not doing a very good job of anything.
I am thinking of switching but would be interested to hear what others are paying.
Thank you

Grumpy_chap

eskimalita7 said:

Hello all
Would anybody mind sharing the margin their umbrella company takes?
Mine is taking a fixed £158 per month and not doing a very good job of anything.
I am thinking of switching but would be interested to hear what others are paying.
Thank you

UC company margins are absurdly low, typically in the range £20 - £30 per week.  5 weeks at £30 = £150, so the fee you are paying is not really outside the typical range.

You say the UC you are with are not doing a very good job of anything.
What job do you expect them to do in in what way are they not doing it very well?

For the low margin, the UC carries quite a lot of cost overhead and risk in my view.  I wonder how any of the UC's survive as there is a race to the bottom.  As for changing to another UC, you will be restricted to the choice that are approved by the End-Client / Agency managing your assignment.  How did you make the choice of the current UC in the first place?

MidLifeMayhem

£21 per week plus an extra £5 per week to process my pension contribution.

£158 per calendar month seems very expensive.   They are all pretty rubbish to be honest.

Sandtree

eskimalita7 said:

Hello all
Would anybody mind sharing the margin their umbrella company takes?
Mine is taking a fixed £158 per month and not doing a very good job of anything.
I am thinking of switching but would be interested to hear what others are paying.
Thank you

Your certainly at the higher end of normal but it also depends 1) who your agency is and 2) if you get any "benefits" with it... from memory mine was circa £25 a week (inc pension if you wanted one) but payment terms weren't the best (the one I originally had was same day payment but they go bought out and the new one was next Friday). 

It'd be interesting to know what you think they are doing badly at as there really isn't much to their work. Late payments are potentially due to the agency being late paying them and in these organisations they aren't taking on any credit risk and only pay you once they themselves have been paid.

Grumpy_chap

It is quite hard for anyone to provide useful and meaningful comment when the reasons the current UC is considered as not very good are explained to the level of:

eskimalita7 said:

not doing a very good job of anything.

and 

MidLifeMayhem said:

They are all pretty rubbish to be honest.

What is the service that is expected and not being received?

MidLifeMayhem

The service expected is competent payment of salary and expenses.   Not underpayments, overpayments, deduction of tax and NI from expenses and sitting on pension contributions for months on end.

Grumpy_chap

In what way is the payment of salary and expenses not competent?
 - If the tax codes from HMRC are incorrect or varying, this will result in altering nett pay but is not the fault of the UC.
 - If the number of hours worked per week caries, this affects nett pay but is not the fault of the UC.
 - If the approval of hours is late by the end-Client manager, or the intermediate agency, this will affect the time of payment but is not the fault of the UC.

When working through an UC, there are only very limited expenses they are permitted to make prior to the calculation of pay subject to tax and NI (which still needs to meet minimum wage rules).  It is mostly genuine business mileage and certain work-related training.  Other expenses, such as professional subscriptions, train travel, hotel, subsistence is normally logged by the UC but not paid - you then need to claim against your tax return at the end of the year.  This means you can claim the expense against income tax but do not save NI.

Pension contributions are normally collated up by the UC and then transferred in bulk rather than at every weekly pay period.  This is done to reduce the admin effort and costs (which all has to come out of the low margin).  Typically, the transfer would be once a month but for first set up, can easily be a few months to get all set up.

You can always change to a different UC, but would need to know whether that would actually be any better by way of service. 
If you don't like the whole way that UC's operate, the only other ways round that is either a role outside IR35 or a direct staff project.

biscan25

I use Fore:two group who charge me £20/week. I think their standard rate is £25 now though.
I chose them because they don't charge extra for salary sacrifice pension contributions. They have other bits as well like a discount scheme but I have never used this (my OH's one is better).
My agency do not restrict the choice of umbrella, provided it is FCA authorised.
I know that plenty do though, and I presume that this is because they get a kickback.

I would add that they haven't always got everything correct, in particular making a substantial PAYE blunder that couldn't be immediately rectified.

Sandtree

biscan25 said:

I know that plenty do though, and I presume that this is because they get a kickback.

May be a small amount but unless its a very high volume agency then its more about its easier for them to only have to deal with 1 or 2 unbrellas meaning only 1-2 submissions to make and only 1-2 payments to make each week/month so lowers their costs rather than having to dealing with 50 umbrellas that each want the data in a slightly different format, 50 payments etc. 

Grumpy_chap

I think Agencies also do some due diligence on the UC's that they agree to work with as the Agencies do not want to be on the receiving end of funds transferred to UC but not making the journey to the worker.