Newbie Question - Agents/Umbrella Companies

[ok cub 2008]

Good afternoon,

Apologies in advance if this has been discussed or answered previously, but I've searched extensively across a range of sources and I can't get a concrete answer to my question.

I'm currently a salaried employee on a one year fixed term contract being paid directly through the payroll of the company I'm carrying out work for.

We're currently in discussion over a contract extension to continue in my existing role, but the pay I'm asking for is outside the acceptable range as defined by the salary bands for staff employed directly through the company payroll. As a workaround, we're exploring the option of me switching to being paid a day rate via a third party agent. There are many other company workers that are paid in this way, but the company mandates that the worker be paid via their preferred agent, Hays.

I have a day rate in mind that I'm planning on asking for - specifically I mean the gross pay per day that I want to receive, irrespective of who ultimately pays my wages.

Firstly, how would this normally work in practice? If I say to my current employer that I want £300 per day, then what would Hays typically charge the client on top of that (given that, other than providing the payroll service, Hays have had no involvement in my recruitment). Would Hays then typically charge me as well for performing the payroll service (which would leave me with an effective gross pay per day of less than £300)? Or would that just be built in to what they invoice to the company I'm performing work for?

I'm just trying to avoid any surprises, and it can be difficult to discuss this as candidly as I would like with my employer without "showing them my hand" in negotiations.

Finally, would Hays' role in this arrangement be what you would strictly refer to as that of an "umbrella company"? Or would that be something slightly different. I guess I'm confused about the line between what is an "agent" and what is an "umbrella company", or is it just that sometimes an agent (by which I mean an entity that is reponsible for seeking and securing the contracting opportunity) often also acts as the umbrella company (the company responsible for issuing invoices to the client, and who pay the contractor via PAYE)?

If that is the case, would I be correct in thinking the above arrangement is almost like Hays being a mandated umbrella company?

I would really appreciate anyone's thoughts on the above.

Many thanks.

[northernladuk]

Have a look in the Public Sector IR35 part of the forum. Tons of threads about exactly this. The Sticky at the top is a good place to start but have a trawl through the threads. Plenty of questions of PAYE vs Umbrella.

Those will answer nearly all your questions. It will definitely clear up the misconception that Hays I'd the Umbrella company at least which is half the battle you have.

[ok cub 2008]

Have a look in the Public Sector IR35 part of the forum. Tons of threads about exactly this. The Sticky at the top is a good place to start but have a trawl through the threads. Plenty of questions of PAYE vs Umbrella.

Those will answer nearly all your questions. It will definitely clear up the misconception that Hays I'd the Umbrella company at least which is half the battle you have.

Thanks for your reply. I've read the sticky you suggest, which hasn't helped answer my question. I appreciate the answer is probably in another thread somewhere, but as I say I've searched extensively across this forum and other sources, and I'm struggling to extract the information I need to answer my specific question.

[ok cub 2008]

So to refine my question slightly, if I were to ask my current employer for day rate £X to be paid through recruitment agency PAYE, what would be the typical mark up applied to my day rate on the invoice issued by the agency to my employer, and would I have to pay any fees myself for the PAYE service, or would that all be bundled into the amount invoiced to the client?

[northernladuk]

So to refine my question slightly, if I were to ask my current employer for day rate £X to be paid through recruitment agency PAYE, what would be the typical mark up applied to my day rate on the invoice issued by the agency to my employer, and would I have to pay any fees myself for the PAYE service, or would that all be bundled into the amount invoiced to the client?

I suspect the agency will offer you a day rate for going with their PAYE and a different one for going via brolly.

Why does the markup matter as long as you are getting the day rate you want?

[ok cub 2008]

I suspect the agency will offer you a day rate for going with their PAYE and a different one for going via brolly.

Why does the markup matter as long as you are getting the day rate you want?

It matters in terms of what my employer would be willing to pay. The situation is a little delicate, I'm in a very powerful bargaining position, but at the same time I don't want to overplay my hand, and therefore I don't want to suggest amount £X only to find that it would imply Hays would charge a rate of £2X to my employer, which would be deemed unreasonable/extortionate, and therefore seem like I was taking the mick. I just want as much information as possible really so I'm not negotiating blind.

I guess the normal process would be:
1) agent finds opportunity and agrees overall charge with employer,
2) agent finds suitable candidate and negotiates their pay through PAYE

But in this case it will be more like:
1) My current employer asks the agent how much they would charge if I was to get a day rate of £300
2) Employer accepts or rejects
3) If employer accepts, Hays must pay me £300 gross pay as agreed.

So my question is, in the second scenario, are there likely to be any complications between steps 2 and 3, where Hays slip in some PAYE service charges directly to me, or is it the case that the convention is for the PAYE agent to earn their desired margin purely by varying the amount charged to the client?

[stek]

I'd imagine the fee for managing this would be same as a brolly - £100-150 a month?

A drop in the ocean really compared with the holiday pay/ERs NI factor, the employer won't be liable for anymore and you will be.

[ok cub 2008]

I'd imagine the fee for managing this would be same as a brolly - £100-150 a month?

A drop in the ocean really compared with the holiday pay/ERs NI factor, the employer won't be liable for anymore and you will be.

When you say I will be liable for the employer's NI, are you saying I would be charged for the employer's NI on my payslip? This is exactly what I'm trying to clarify. If I say I want a day rate of £300, I mean on my payslip the gross pay should be £300 per day, with only Tax and EE's NI deducted.

[northernladuk]

IMO the 300 a day will not include any charges for brolly or PAYE. That's your problem now. It'll be 300 a day if you don't use their PAYE or 300-PAYE service charge. Bit rich asking a client to pay your day rate as a contractor and then expect them to pay your business costs.
That said you do say you are in a strong bargaining position...

[northernladuk]

When you say I will be liable for the employer's NI, are you saying I would be charged for the employer's NI on my payslip? This is exactly what I'm trying to clarify. If I say I want a day rate of £300, I mean on my payslip the gross pay should be £300 per day, with only Tax and EE's NI deducted.

Surely that's not gross then. You will get paid 300 a day. Everything else has to come out of that and you take the rest home.
You are entering a completely different financial structure so you can't compare them like for like.

Pick up the phone to Hays and get them to explain how they do it and the pick up the phone to Lucy at Contractor Umbrella and get them to explain how they do it and then you'll know.