FTC or Umbrella

[Blencathra]

I have been offered a 9 month contract with a client that I intend to accept, given the current climate. It’s a mat leave cover with two direct reports so clearly inside IR35.

The client has given me a choice of either a 9 month fixed-term contract with some permi benefits (bonus, car allowance, pension - tbc) obviously no shares or long-term benefits. The other option is an hourly rate through an Umbrella.

I’ve tried to calculate monthly take home pay of the FTC package vs umbrella option using online calculators and it looks roughly similar.

Having previously contracted only through my Ltd co. I have never worked through an umbrella or on a FTC, does anyone have a view on the relative pros/cons of each option?

Thanks in advance.

[ladymuck]

I'd go FTC personally.

Unless you can confirm who is going to pay the employer's NI that an umbrella would usually deduct from your pay. You won't get any of the other permie benefits from an umbrella either.

[Blencathra]

I'd go FTC personally.

Unless you can confirm who is going to pay the employer's NI that an umbrella would usually deduct from your pay. You won't get any of the other permie benefits from an umbrella either.

It looks like they have reduced the salary with the FTC option to account for the employer’s NI that the client would pay. So the FTC package including benefits seems roughly the same as umbrella based on monthly take home pay.

[ladymuck]

Ah, well you never said that.

Hard to compare two packages without all the info.

[Blencathra]

Ah, well you never said that.

Hard to compare two packages without all the info.

I did say in the OP that monthly take home pay between the FTC package and umbrella option is roughly the same.

[SueEllen]

I did say in the OP that monthly take home pay between the FTC package and umbrella option is roughly the same.

Take the benefits. You will get paid for bank holidays.

[jayn200]

If the take home is the same the answer is FTC. You are technically employed if you're on an FTC or working through an Umbrella, but the umbrella company will most likely pay you a very small salary with a large bonus. They will try and give you a contract that gives up most of your employment rights (whether its enforceable or not is another discussion), the ones you do retain will be tied to your minimal salary.

Then you also have potential payment delays and insolvency issues to deal with in the Umbrella company. Now your client is paying the umbrella company and then the umbrella company have to pay you. I haven't really heard of very many issues if any issues at all of employers failing to pay a FTC, they usually go through normal payroll which is a priority for most companies to pay. However there are lots of cases of people getting screwed with either late or non payments through umbrella companies. Either the client withholding payment from the umbrella company or the umbrella company paying the client significantly late because they have cashflow issues (they will claim another reason)

There are so many reasons to take the FTC and I can't think of a single reason to go with the umbrella company if the pay is the same.

[eek]

If the take home is the same the answer is FTC. You are technically employed if you're on an FTC or working through an Umbrella, but the umbrella company will most likely pay you a very small salary with a large bonus. They will try and give you a contract that gives up most of your employment rights (whether its enforceable or not is another discussion), the ones you do retain will be tied to your minimal salary.

Then you also have potential payment delays and insolvency issues to deal with in the Umbrella company. Now your client is paying the umbrella company and then the umbrella company have to pay you. I haven't really heard of very many issues if any issues at all of employers failing to pay a FTC, they usually go through normal payroll which is a priority for most companies to pay. However there are lots of cases of people getting screwed with either late or non payments through umbrella companies. Either the client withholding payment from the umbrella company or the umbrella company paying the client significantly late because they have cashflow issues (they will claim another reason)

There are so many reasons to take the FTC and I can't think of a single reason to go with the umbrella company if the pay is the same.

Salary sacrifice into a pension would be the only valid reason (and even then probably only if you are planning to put £25k plus into a pension).

[Blencathra]

Thanks for the comments. I'm currently leaning towards Umbrella rather than FTC. The FTC package includes bonus which will have rules about when it is paid and how long I will need to have worked in order to qualify.

The Umbrella options seems to give me more flexibility as I will have the cash paid monthly and therefore have more flexibility to leave when it suits me - especially if outside IR35 roles start to appear.

Also, with Umbrella I can do salary sacrifice into my own personal pension rather than having to pay in to a new pension pot with Client Co.

[malvolio]

Only if you use the right umbrella. More than a few only allow the statory minimum payment.

And planning that you may want to bail out early as a decider is not actually a smart move all things considered. If it's Mat Cover then it's a finite requirement. You can give notice on an FTC as well.