Umbrella Co -Self-employed ?

[ss002d6252]

A nurse works with an Agency who find work (at the moment only 1 agency is used but this may change in future).

Monies are paid via an umbrella company (Paymax) who then deduct PAYE and forward the monies to the nurse.

The contract with the umbrella company states that there is no employment contract with them, they are deemed as an employer only for the purposes of tax and NI collection by HMRC.

Under what basis is the nurse treated for general purposes - as Self Employed for employment law purposes but with earnings accounted for via PAYE for tax purposes ?

[ladymuck]

Pretty much bang on. Worst of both worlds. No rights but all the tax.

[ss002d6252]

Pretty much bang on. Worst of both worlds. No rights but all the tax.

Thanks - that's one issued ticked off the list.

Now to move on to the next one.

[Seahorse17]

No, that's not correct.

If you work via an umbrella, you are an employee of the umbrella, and entitled to NMW, sick pay, holiday pay etc (all of which will ultimately come out of your day rate).

[Seahorse17]

See What everybody ought to know about umbrella companies particularly 'Myth 1'

[ladymuck]

No, that's not correct.

If you work via an umbrella, you are an employee of the umbrella, and entitled to NMW, sick pay, holiday pay etc (all of which will ultimately come out of your day rate).

Yep (my emphasis). You pay for everything, including employers NI. They don't contribute to your pension, and you have to pay the Apprentice Levy. Oh, and you have to pay them a fee. Claiming (I guess it's more of an offset) of expenses is also very limited.

All the things an EMPLOYER would pay on your behalf, comes out of your daily rate.

You don't get paid notice on your contract termination, if your client doesn't pay it.

You don't have the right to redunancy pay.

You don't have the right of challenging constructive dismissal.

You don't get other rights too but, hey! You're an employee of an umbrella company, it's all golden.

Nope. It's the worst of both worlds.

[cojak]

For beginners, for those who aren’t confident, competent or bothered to run their own business (or work in the NHS), umbrellas provide an alternative method of contracting.

Many people prefer to use umbrellas, and shouldn’t be castigated for doing so.

[Seahorse17]

The original question was:

"Under what basis is the nurse treated for general purposes - as Self Employed for employment law purposes but with earnings accounted for via PAYE for tax purposes ?"

The point I was making is that the above is incorrect - For employment law purposes they are an employee of the umbrella.

The distinction can be important in all sorts of situations (e.g. Mortgage application, maternity pay) , so people do need to understand their status.

[ss002d6252]

Hmmm..

These are some of key sections of the umbrella contract

OUR RELATIONSHIP
Despite paying you on a PAYE basis you are not an employee or a worker of us and do not qualify for things like holiday pay. As stated earlier in this leaflet you are paid PAYE because of the circumstances of the contract, you are not paid PAYE because you are our employee.

Status of this engagement
36. Under this contract you will not be an employee or a worker of PAYMAX for general statutory employment rights purposes.
37. The tax and National Insurance rules applied by HM Revenue & Customs are not the same as for general statutory employment rights purposes. Under this contract all payments to you for the Services will constitute employment income, but for tax and National Insurance purposes only.
38. Therefore in accordance with HMRC rules and PAYMAX’s client’s requirements, PAYMAX will deduct PAYE and Class 1 National Insurance Contributions from payments for Services made by PAYMAX to You. PAYMAX will also account to HMRC for Secondary Class 1 National Insurance Contributions on all payments for Services made to You by PAYMAX under this agreement. You agree to this treatment and to the deduction of these amounts from any payments made by PAYMAX to You.
39. The above clauses 38 and 39 apply for the express and limited purposes of HM Revenue & Customs’ treatment of this engagement. For tax purposes only, this engagement constitutes employment under Section 4 of the Income Tax (Earnings and Pensions) Act 2003 (“ITEPA”).
40. Otherwise than as explicitly specified under this contract You are a self-employed Operative. You have no contractual entitlement to sick pay, nor to any other payment during periods when Services are not provided including where the Services are cancelled by PAYMAX or by PAYMAX’ client.
41. You do not have any right to paid holiday under this contract.
42. ....
43. Except as mentioned in clauses 37 and 40 for the express purpose of ITEPA, the parties agree that the relationship between them is not one of employer and employee and that You are not engaged as a worker by PAYMAX.

[cojak]

If they aren’t then they are NOT an umbrella company.

Their contracts are weaselly. For mortgage purposes employment is employment.

Umbrella companies employ contractors. It’s as simple as that.

https://www.contractoruk.com/umbrell...companies.html

https://www.contractorumbrella.com/q...a_company.html