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  1. #1

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    Default Agency suddenly imposing new Umbrella Company conditions

    Ok, I'm currently a contractor, working at a company where I'm employed through an agency. Basically I submit my timesheets each week to the agency, and they pay my umbrella company each month, who then pay me. (And they say Contracting is complicated. What's cimplicated about it? )

    Basically though, my current Umbrella company has decided to cease trading so I need to find another one.
    However, the agency I'm employed through have decided that they will only allow Umbrella companies that are on a list that they specify (one of the companies on this list is, surprisingly, run by the agency themselves), and they are adamant that they will not allow any other umbrella companies to be used.

    Now, there's a guy in our office with his own limited company who has offered to do PAYE for some of us in the office, but the agency have stamped their feet and said No. Only allowed with someone on the list or through your own limited company, nothing else is allowed.

    Basically what I'm wondering is, are they allowed to do that? Can they dictate who I can and can't use?


    My contract says nothing about having to use only someone that they nominate onto a list, and my previous umbrella company was actually someone else in the office, who wasn't on any list, and there's been no changes to my terms and conditions since then. The agency however are threatening to not give me a contract if I refuse to use someone on their list, who all charge at least twice as much per month as the person I want to use. (And I have strong suspiscions that these 'nominated' companies are paying a commission to the agency for every employee they get from said agency)

    I argued that my contract said nothing about having to use their own preferred companies, their response was that nothing in my contract says I can use whatever company I like. However it's certainly implied that I can, since I've used whatever company I like in the past.

    Any advice would be very much appreciated!

  2. #2

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    Quote Originally Posted by MaxxPower View Post
    Ok, I'm currently a contractor, working at a company where I'm employed through an agency. Basically I submit my timesheets each week to the agency, and they pay my umbrella company each month, who then pay me. (And they say Contracting is complicated. What's cimplicated about it? )

    Basically though, my current Umbrella company has decided to cease trading so I need to find another one.
    However, the agency I'm employed through have decided that they will only allow Umbrella companies that are on a list that they specify (one of the companies on this list is, surprisingly, run by the agency themselves), and they are adamant that they will not allow any other umbrella companies to be used.

    Now, there's a guy in our office with his own limited company who has offered to do PAYE for some of us in the office, but the agency have stamped their feet and said No. Only allowed with someone on the list or through your own limited company, nothing else is allowed.

    Basically what I'm wondering is, are they allowed to do that? Can they dictate who I can and can't use?


    My contract says nothing about having to use only someone that they nominate onto a list, and my previous umbrella company was actually someone else in the office, who wasn't on any list, and there's been no changes to my terms and conditions since then. The agency however are threatening to not give me a contract if I refuse to use someone on their list, who all charge at least twice as much per month as the person I want to use. (And I have strong suspiscions that these 'nominated' companies are paying a commission to the agency for every employee they get from said agency)

    I argued that my contract said nothing about having to use their own preferred companies, their response was that nothing in my contract says I can use whatever company I like. However it's certainly implied that I can, since I've used whatever company I like in the past.

    Any advice would be very much appreciated!
    Long story short, yes they can insist you only use an Umbrella on their approved list, it may be to stop situations like this where small umbrellas stop trading which causes them a perceived ball ache to change their billing etc, but probably because they get a kick back from referrals (just a guess)

    There are a few threads already discussing this, I can't be arsed using search for you to post any links
    “Live a good life. If there are gods and they are just, then they will not care how devout you have been, but will welcome you based on the virtues you have lived by. If there are gods, but unjust, then you should not want to worship them. If there are no gods, then you will be gone, but will have lived a noble life that will live on in the memories of your loved ones.”

    ― Marcus Aurelius

  3. #3

    Should post faster


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    Quote Originally Posted by SimonMac View Post
    Long story short, yes they can insist you only use an Umbrella on their approved list, it may be to stop situations like this where small umbrellas stop trading which causes them a perceived ball ache to change their billing etc, but probably because they get a kick back from referrals (just a guess)

    There are a few threads already discussing this, I can't be arsed using search for you to post any links
    Although it does happen, umbrella companies that offer referels will be breaking the law as per the bribery act. The good umbrella companies have not and will not do this.

    Most agencies have PSLs that include fully audited umbrella companies that have opened the books to the FSCA and HMRC, are regularly re checked, have case law backed overarching contracts of employment, and are completley transparent in how they operate.

    This is to protect the agency, the contractor and the end client. Too many dodgy umbrellas have gone bust leaving contractors out of pocket, agencies having to pay out twice and end clients really annoyed due to the hassle, disruption and loss of reputation. And it tars the rest of us in the industry with the same brush.

    You get some umbrella companies offering ridiculous take home pay amounts, a free service and pay referrals and you have to ask where the money is com ing from to do all of this.

    I know I am not impartial but PSLs are really there to protect everyone in the supply chain when done properly and as we move towards the AWR coming in you will see more and more of this.
    Last edited by Steven@Parasol; 15th April 2011 at 09:24. Reason: spelling

  4. #4

    Still gathering requirements...

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    legally the agency are entitled to engage whichever company they see fit to provide a consultant for the assignment, so they are within their rights to refuse to engage certain umbrella companies.

    however there was legislation brought in 2007 that can actually mean that agencies who take an active role in guiding their contractors towards certain umbrellas can be made liable for any unpaid/additional taxes due as a result of non-compliance, whereas agencies that leave the decision completely up to the contractor cannot have any tax liabilities passed on to them, so to my mind it doesn't seem in the agency's interests to refuse to use a particular umbrella. that said, there may well be some truth in your assumption about umbrellas paying agencies commissions for business.

    essentially the situation boils down to "who needs who more" - i have had countless of my contractor clients use umbrellas that are not on the agency's preferred supplier list simply by putting their foot down and saying "if you want me, then you'll have to engage this umbrella", however whether you feel you are in a position to be this bullish is a judgement call...

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    i may have another solution for you - PM me if interested

  6. #6

    Should post faster


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    Quote Originally Posted by PhilCBN View Post
    legally the agency are entitled to engage whichever company they see fit to provide a consultant for the assignment, so they are within their rights to refuse to engage certain umbrella companies.

    however there was legislation brought in 2007 that can actually mean that agencies who take an active role in guiding their contractors towards certain umbrellas can be made liable for any unpaid/additional taxes due as a result of non-compliance, whereas agencies that leave the decision completely up to the contractor cannot have any tax liabilities passed on to them, so to my mind it doesn't seem in the agency's interests to refuse to use a particular umbrella. that said, there may well be some truth in your assumption about umbrellas paying agencies commissions for business.

    essentially the situation boils down to "who needs who more" - i have had countless of my contractor clients use umbrellas that are not on the agency's preferred supplier list simply by putting their foot down and saying "if you want me, then you'll have to engage this umbrella", however whether you feel you are in a position to be this bullish is a judgement call...
    Its not about referrals, its about compliance, risk mitigation and protecting all those in the supply chain.

    An agency that is doing the correct due dilligence on the umbrella companies it works with is only promoting best practice by refusing to engage with an umbrella that it believes poses a risk to the contractor, the end client or the recuiter themselves. The cost of a dody umbrella or a poorly managed umbrella that goes bust is both financial and reputational and its simply not worth the risk in my view. Again, I am not impartail.

  7. #7

    Fingers like lightning


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    You have the contract.

    Your end client is presumably happy?

    Tell them to stick their umbrella where the sun don't shine

    Or you could just go LTD. It really isn't very hard. Indeed, less risk and hassle than using an umbrella IMHO.

  8. #8

    Double Godlike!

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    Quote Originally Posted by prozak View Post

    Or you could just go LTD. It really isn't very hard. Indeed, less risk and hassle than using an umbrella IMHO.
    Not true.

    While it's not hard to run a limited company, particularly if you have a helpful accountant who specialises in contractors, directors of limited companies have legal responsibilities. Therefore if you don't have a helpful accountant or don't know how to ask and research the right answers to questions you could end up in a mess.

    Plus some people have to work under umbrellas due to bad credit ratings meaning they have difficulty opening a business bank account.

  9. #9

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    Quote Originally Posted by SueEllen View Post
    Not true.

    While it's not hard to run a limited company, particularly if you have a helpful accountant who specialises in contractors, directors of limited companies have legal responsibilities. Therefore if you don't have a helpful accountant or don't know how to ask and research the right answers to questions you could end up in a mess.

    Plus some people have to work under umbrellas due to bad credit ratings meaning they have difficulty opening a business bank account.
    I'm interested in learning how an opinion cannot be true?

    I include in my definition of risk absolutely everything that can go wrong, including having yet another intermediary that can stuff up payments or go broke.
    Last edited by prozak; 15th April 2011 at 13:59.

  10. #10
    PSK
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    As a relatively recent convert to being a contractor, I realise I am ignorant about the detail of agency law, agency and contractor tax liabilities, MSC, AWD and suchlike to even know if what follows is relevant to why an agency might want to have performed some due diligence and restrict contractors choices. I'm also conscious about the source of the update - rather than post a link, it is an article in recruiter.co.uk.


    Recruiters urged to review contractor compliance procedures
    Wed, 13 Apr 2011


    Recruiters need to review their compliance practices after reports that a recruitment agency and its director are facing a £10m Transfer of Debt notice from HMRC under Managed Service Company legislation, according to The Freelancer and Contractor Services Association (FCSA).
    Under the legislation, third parties including recruiters or their individual officers and directors can have unpaid tax debts from individual contractor limited companies transferred to them where they have encouraged or been actively ‘involved’ in services to those companies which are caught by the MSC rules.
    FCSA says the case highlights the very real danger of ignoring compliance in this area. “Since its creation, FCSA has advised of the need to take this issue seriously and ensure appropriate due diligence is in place to manage this risk.
    “In simple terms, there are two different ways of doing this correctly. One is to leave contractors and freelancers alone to gather their own information on the different ways of working available to them and allow them to choose an appropriate service provider without help.
    “The other is for recruitment agencies to add value for their contractors by providing a preferred supplier list (PSL) of organisations which are providing their services in a fully compliant way.
    “There are benefits and disadvantages to both approaches but either approach, if implemented thoroughly, can minimize risk.”
    Stuart Davis, chair of FCSA, adds: “This need for appropriate due diligence is the basis of the FCSA Code of Conduct. We would advise all recruitment agencies to apply this Code or simply use FCSA member businesses if it wants to put a PSL in place.
    “The Code demonstrates that FCSA member businesses are operating compliantly with all relevant legislation, including MSC legislation, and therefore deals with the Transfer of Debt risk directly. Such an approach enables recruitment agencies to establish robust PSLs, which deliver benefits both to their contractors and their own businesses, without exposing themselves to the significant risks in this area.”

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