Together with our fellow FCSA members, and the FCSA itself, we have often had to be vocal in our defence of the legitimate umbrella industry in the face of negative press. These inflammatory articles almost always treat umbrella companies as nothing more than outsourced payroll. In doing so, they are perpetuating the most common myths about umbrella working.
Here we aim to clear up the biggest of these misunderstandings. We want to get across that “proper” umbrella companies are contractor champions rather than pantomime villains guilty of pillaging the temporary workforce.
Who wouldn’t be tempted by such an offer? Alas, this is the biggest myth of all. A compliant umbrella company employs its workers and operates PAYE and NI contributions, as well as adhering to National Minimum wage and processing holiday pay.
The only difference in take home pay between legitimate umbrella companies should be the margin they retain.
Any “umbrella” provider promising up to 90% take home pay is most likely to be a contractor loan scheme. HMRC are clear that they regard such schemes as tax avoidance so getting involved with one could land you in seriously hot water with the tax man.
As far as compliant umbrella providers are concerned, employed means employed; and that’s for benefits as well as tax purposes. Umbrella company employees get the same statutory benefits as permanent employees including a workplace pension, holiday pay, statutory sick pay and statutory maternity or paternity pay. You will also be fully covered under your Umbrella’s insurances.
Additional lifestyle rewards is an area where contractors often miss out, but with Liquid Perks, Liquid Friday employees have access to a range of savings and discounts at loads of supermarkets, restaurant chains, high street stores, cinemas and more.
This is something that the unions and certain elements of the press love to jump upon. Most commonly they misrepresent the Umbrella rate as the worker’s “top line”.
The key thing to remember is that there is a difference between the Umbrella assignment rate and the worker’s pay rate. The Umbrella assignment rate is the amount paid by the agency or client to the Umbrella Company to cover all the costs of the services delivered, and the umbrella margin. The worker’s pay rate is increased (aka “uplifted”) to give the umbrella assignment rate to cover all of the costs of employing the worker, including Employers National Insurance, Apprenticeship Levy, Employers Pension Contributions and holiday pay, as well as the umbrella company operating costs and margin.
The worker’s gross pay rate is the amount paid to the employee before deductions for PAYE tax and Employee’s National Insurance.
This is a topical one because of changes to the rules for off-payroll workers in the public sector, which were introduced in April.
Busting the myth that umbrella workers are subject to IR35 is actually very simple. The IR35 rules were designed to tackle disguised employment; as an umbrella worker you are already an employee, therefore outside the scope of IR35.
It is also worth a mention that umbrella companies calling themselves “IR35 compliant” is nothing more than marketing spin. Umbrella companies are, by definition, exempt from IR35.
What our industry’s detractors fail to understand is that the purpose and value of umbrella companies goes far beyond the simple payroll function.
Certainly at Liquid Friday we take our employer responsibilities very seriously and that means more than having the right contract with our workers and getting them paid.
As a Liquid Friday employee you can expect an excellent pay and benefits package and the best support from our Head Office team.
Whether you are starting out on a contracting career, thinking of changing from a limited company or just switching umbrellas, get in touch with our dedicated team and how we can help.
If you are already employed by Liquid Friday, we’ll reward you handsomely for bringing your colleagues and friends onboard.