With IR35 reforms just around the corner and HMRC choosing to clamp down on tax avoidance schemes, Umbrella companies have been receiving a lot of attention in the industry lately.
While Umbrellas are often seen as a last resort for ‘inside’ IR35 contractors left with no other choice, in reality, working with an Umbrella company (providing it is moral and compliant) comes with a wide range of protections and benefits for contractors, hirers, and agencies, some of which aren’t present for PSC engagements.
We’ve put together a list below to help you understand the key advantages that many workers, agencies, and end hirers are already making the most of with a compliant Umbrella partner.
- A contract of employment rather than a contract for services, providing you with greater employment rights.
- Entitlement to all statutory employment rights including, but not limited to, holiday pay, sick pay, maternity and paternity pay, and employer pension contributions.
- Continuity of employment across many assignments for different employers. This provides longevity of employment with one employer that is more attractive to lenders and mortgage providers.
- Far less likely to be on an emergency tax code for long periods due to multiple employments. This has big cash flow advantages for workers as you won’t have to struggle to explain their circumstances to HMRC.
- Peace of mind that all taxes are properly accounted for when working for a compliant, independently-audited, FCSA-accredited Umbrella employer.
- Workers become employees of very large employers as opposed to smaller recruitment businesses. As such, you have more perks of employment, e.g. free personal accident insurance cover, exclusive discounts at retail stores, and many more lifestyle support packages and retail and leisure discount packages.
- Advances or late amendments to pay are possible with large Umbrella employers who often have longer opening hours and more payroll processing staff available on Fridays.
- Help with employment tax queries from a large team with a combined breadth of experience – often far greater than that of a much smaller agency team.
- Accrued holiday pay can be advanced which is not always possible with many agencies’ own payroll software.
- Portals are more often available for workers to access their pay information at any time.
- FCSA-accredited Umbrella companies give you peace of mind that you’re working with a reliable and financially sound employer whose owners and directors have passed “fit and proper person” audits.
- Discounted prices for help with tax returns (where required).
- Many recruitment agencies are only able to offer a contract for services as opposed to an employment contract. This is seen as a negative for some workers due to them receiving fewer employment rights, meaning it can be more difficult to attract and retain the best workers in a sector where demand now far exceeds supply.
- Umbrella employers offer a known fixed cost to recruitment businesses that makes it easier for recruitment businesses to account for all costs of supply and build in a certain margin without having to inflate their prices for less certain costs of employment.
- The use of Umbrella employers significantly reduces employers’ liability, public liability, and professional indemnity insurance costs which are based on employee numbers.
- Bank charges per payment are usually lower when large umbrella employers are paying workers in comparison to recruitment agencies as the volumes of payments lower the unit costs. Plus, as you’re making only one payment to an umbrella employer rather than many payments to workers, your banking costs are substantially reduced.
- Umbrella employers can pay workers with multiple sources of income from different agencies. Without this, those workers can get frustrated with constantly being on emergency tax codes.
- Large Umbrella employers are often better equipped to deal with grievances and disciplinary issues, having HR teams that can work with hirers and agencies to co-ordinate the right result for all. Many agencies do not have the extensive in house expertise to handle these issues professionally so end up with long-lasting disputes, unexpected costs or large solicitor’s bills.
- Many recruitment businesses don’t have the volumes of workers to attract added-value offerings e.g. personal accident cover for their workforce. Being able to use umbrella employers enables the agency to attract and retain the best workers.
- Umbrella employers provide another check on workers’ eligibility to work in the UK, reducing the risk of engaging with illegal workers with forged documents.
- The use of professional outsourced employers frees up agencies’ own staff and senior management resource as many payroll queries can be easily dealt with by a team of outsourced specialists without needing to involve the agency management.
- Workers who regularly come and go with short contracts can create an unmanageable workload for smaller agencies. Umbrella employment allows workers to continue to be employed by the same employer across several assignments with different end hirers so there isn’t the same frequency of starters and leavers.
- Umbrella companies are professional outsourced employment experts who are often able to better support an agency as they have a bigger team to ensure all workers can still be paid on time every time even when there are late timesheets or complex queries or issues.
- Reduces the financial risk of excessive sick pay, maternity and paternity pay which can be more easily accommodated by larger, financially strong umbrella employers who can spread the risks of this cost over a wider number of employees.
- Umbrella employment is more attractive to many workers due to all the reasons listed in the worker advantages section above. This delivers more loyalty from workers allowing greater worker retention.
- Umbrella employment outsourcing is more attractive to lots of agencies due to all the reasons listed in the recruitment businesses advantages section, leading to more workers being attracted to and retained for supply to your operation.
- Enables end hirers to stay one step ahead of their competitors when looking to attract the best workers, who, in these times will have sufficient options to choose the best-fit end hirer.
- Having safe and compliant solutions on offer makes the agencies’ jobs easier, leading them to prioritise end hirers who enable them to attract and retain the best workers.
- Working with FCSA-accredited umbrella employers in your contracting chain can lower the risk profile of your contracting chain within HMRC. Umbrella employers were banned in parts of the Public Sector in 2017 after similar legislation changes, resulting in a drive for agencies and workers to using alternative non-compliant options in an attempt to keep everyone happy. The result was quite the opposite, with many workers ending up with huge tax assessments.
- Large end hirers can drive the right behaviours in their recruitment businesses’ Preferred Supplier Lists by insisting on the use of a limited number of FCSA-accredited Umbrella employers that fit their required profile. This gives the end hirer more control over their supply chain and can be good evidence in showing diligent enforcement of best practices in line with the Government’s Good Work Plan.
- End hirers can be assisted with far better support on employment disputes from a professional outsourced employment business.
- A happier workforce and happier agency PSL will result in a lower churn of workers, which will always result in a better experience for your own customers.
- HMRC has positively embraced FCSA-accredited Umbrella employers as compliant large collectors of taxes. This gives end hirers more confidence in taxes being thoroughly and professionally managed by experts within their supply chain.
- Finding the Umbrella employer(s) with the right experience in your sector can effectively give you access to no-cost experts, viewing your sector from a different angle. Many choose to draw upon this expertise when developing their own strategies or dealing with labour supply problems.
- As the umbrella employment sector develops, more added value benefits will become available for workers. Don’t miss out on being able to offer something new to the workers you engage. Other large end hirers have already been through this exercise and are now fully embracing Umbrella employment.
- Checking pay rates meet AWR requirements is a lot easier when end hirers communicate with Umbrella companies who can assist with ensuring this area is thoroughly considered and audited.
Crest Plus has been trading for over 21 years. As FCSA members, we have been thoroughly audited by third-party regulated professional accountants and solicitors, so you can have peace of mind we are always operating compliantly with tax and employment laws.
Click here to find out more about Crest Plus Umbrella or click here to explore the full range of benefits.