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New to Umberlla and some questions.

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    New to Umberlla and some questions.

    Hello all,

    I used to work about one day a week for an agency and they made me sign up to orangegenie to get paid. My main job closed down in March and this has left me no choice but to increase my hours at the agency.

    When I contact orangegenie they always seem to confuse me about what charges they taking and I really do not understand what is going on.

    I agreed with agency I was getting paid £9 an hour, but I get far less than this through pay, orangegenie said they take 5% but this does not make sense to me, why I am paying them, surely the recruitment agency should? this means I am getting less than £9 an hour which is not what I was told.

    My pay seems very low for the work im doing example for one week:

    24 hours worked, agency: , period: 05/04/2015 £216.00
    LESS
    Margin £10.80
    Employment Costs, Including Employer's National Insurance £18.40
    Holiday Pay Accrued £15.80
    Workplace Pension £1.70
    Business Expenses Reimbursed £13.30

    Your Employment Income £156.00


    So I am paying for the employers NI, correct? (I only earn about 10k a year and never really paid much tax before, as my husband is main earner in our house)

    I am paying for workplace pension? this correct? where does this money go?

    I also have to pay for my own holiday pay out of my wages?

    Sorry for all the questions im just so confused about this all and feel like I am being taking advantage off.

    #2
    Originally posted by suezy View Post
    So I am paying for the employers NI, correct? (I only earn about 10k a year and never really paid much tax before, as my husband is main earner in our house)
    Employers NI is due if you earn over the secondary threshold limit of £155 a week

    See National Insurance Thresholds « TaxAid

    Originally posted by suezy View Post
    I am paying for workplace pension? this correct? where does this money go?
    You need to ask your employer, the umbrella company. It may be that you can opt out of the scheme, but you need to talk to them about it.

    Originally posted by suezy View Post
    I also have to pay for my own holiday pay out of my wages?
    Yes, if you want paid leave.

    Someone has to pay for your benefits, and it's going to be you rather than the umbrella company - that's just the way they work.
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    Comment


      #3
      Umbrella companies, like any other employer, have a legal obligation to pay Employer's National Insurance contributions which are taken as a percentage of earnings over a threshold - that percentage is 13.8%.

      The umbrella company will have a business to business contract with the agency/end client and will invoice them for the work that you've done on a monthly or weekly basis at the rate that has been agreed in the contract. The umbrella company will have a contract of employment with you (you should have signed one before the start of the contract). They will pay you a salary which is calculated as - the amount that the agency has paid them for the work that you've done LESS their margin (5% in this case) LESS the amount that the umbrella company is legally obliged to pay for Employer's National Insurance.

      Once any UK business is over a certain size they have to have a pension scheme set up and you have to be enrolled in it - you do have the option to opt-out but only once the first payment has been made. As an umbrella company is your employer they have to abide by these rules once they are a certain size in the same way as all other companies.

      Holiday pay is usually dealt with by deducting an amount each week/month, according to your salary, which is then paid back to you when you take holiday or when you leave the umbrella company's employment (it should never be retained by them). This is not ideal but it is the only way that umbrella companies can remain compliant with the EC Working Time Directives - rolled up holiday pay is no longer allowed so a wage slip must show that you have been paid holiday pay when you are actually on holiday. Some contractors working with umbrella companies earn over £500 per day which means that their holiday pay - if calculated in the normal manner - would be £14,000 (£500 x 28) per year; if the umbrella company's margin is only £30 per week say, they would be trying to finance £14,000 from about £1,400 which is obviously impossible. I spoke to an number of Government agencies as well as the department in Brussels that introduced the legislation and the model that most umbrella companies use to deal with holiday pay was agreed to be the best arrangement.

      Your current umbrella company really should have been able to explain all this to you in detail

      HTH
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      Comment


        #4
        Hi guys many thanks for your answers it is really appreciated.

        Is it legal for the agency to force me to use an umbrella company, just after all these things being taken out I am basically on min wage.

        I surely would be better to invoice them each week for the work and they pay me direct and me pay any taxes due as self empolyed? no?

        Comment


          #5
          Originally posted by suezy View Post
          Hi guys many thanks for your answers it is really appreciated.

          Is it legal for the agency to force me to use an umbrella company, just after all these things being taken out I am basically on min wage.

          I surely would be better to invoice them each week for the work and they pay me direct and me pay any taxes due as self empolyed? no?
          A recruitment agency will not deal with a sole trader so that is not an option that's open to you. You could open a Limited Company but I would guess that you would be inside IR35 which would mean that your tax position would not really be any different as you will still have to be paid through PAYE.
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          Comment


            #6
            Originally posted by LisaContractorUmbrella View Post
            ...
            Some contractors working with umbrella companies earn over £500 per day
            ...
            Any contractor earning even close to that should be running their own Ltd.

            Comment


              #7
              Originally posted by SlipTheJab View Post
              Any contractor earning even close to that should be running their own Ltd.
              Why? We have a number earning over £1000 per day - some people just like the ease of working through an umbrella company
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                #8
                The way you're used to working you'd get £8 an hour (say). The agency would charge the client £20 an hour, and they'd cover your holiday pay, pension and employers ernic out of the £12.

                So for 24 hours of your work (under the old way), the agency charges client £480, pays £18 Employers NI, £15 Holiday, £2 workplace pension. And then pays you 8x24 = £192 + £14 for your expenses (approximate figures). They make ~£240 profit.

                Now the agency charges the client £480 and pays the umbrella company £216. So the agency profit is now £264. They've also sacked an admin assistant as they no longer need to handle the payroll themselves. So they've made even more. If they're financially linked to the brolly company, then they're even more quids in.

                You end up with less take home pay, as all those employment costs that used to come out of the client fee are now coming out of your fee. They may have sold you this way of working on the basis that your hourly fee is now higher... but as you can see they benefit, while your take home pay is much reduced.
                Down with racism. Long live miscegenation!

                Comment


                  #9
                  Originally posted by LisaContractorUmbrella View Post
                  Why? We have a number earning over £1000 per day - some people just like the ease of working through an umbrella company
                  If you're IR35 caught, and prepared to take the risk that someone else can disappear with your money or can't be bothered to chase an agency if they don't pay you, then umbrellas can make sense whatever rate you're on
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                  Comment


                    #10
                    Originally posted by TheFaQQer View Post
                    If you're IR35 caught, and prepared to take the risk that someone else can disappear with your money or can't be bothered to chase an agency if they don't pay you, then umbrellas can make sense whatever rate you're on
                    Indeed its not so much that its the least tax efficient mechanism available to you but that its one more link in the chain that can p!ss your hard earned up the wall while also not giving a stuff if you actually get paid or not. Be in control and the only way to do that is being Ltd.

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