Reply to: AWR and Agency/Umbrella Relationships

[DolanContractorGroup]

I'm curious - when you say Umbrella's have to pay SSP etc, and it's a cost of doing business, which part of the Umbrella business model (outside the Umbrella employee's income from the client) allows Umbrella's to fund such a cost?

Most consultancies, that I know of, charge such high rates, so as to cover all their fee and non-fee paying employees for this sort of thing.

Is it a simple uplift? Employee gets x, Umbrella sells to agency at x+£markup, agency sells to client for x+£markup+£another markup?

Hi pacontracting,

It comes from the bottom line. If it's a well established business, there is usually some provision for these sorts of things.

Thanks


Zeeshan

[eek]

Correct. I'm not in the business of running an umbrella company hence the question. Just curious about the business model.

Certainly agencies make their money by tagging on a % to the contractor day rates, multiply this by a lot of contractors, spread out over time, which provides them with an income to pay for premises and staff, and make a profit. Is the Umbrella company model any different, especially as they have provide employment benefits to their 'fee earning' employees i.e. temps. That money must come from somewhere?

Umbrella's make their money from the fee they charge every week / month for processing the payroll payment

[pacontracting]

You are misunderstand how an umbrella works.

Correct. I'm not in the business of running an umbrella company hence the question. Just curious about the business model.

Certainly agencies make their money by tagging on a % to the contractor day rates, multiply this by a lot of contractors, spread out over time, which provides them with an income to pay for premises and staff, and make a profit. Is the Umbrella company model any different, especially as they have provide employment benefits to their 'fee earning' employees i.e. temps. That money must come from somewhere?

[northernladuk]

I'm curious - when you say Umbrella's have to pay SSP etc, and it's a cost of doing business, which part of the Umbrella business model (outside the Umbrella employee's income from the client) allows Umbrella's to fund such a cost?

Most consultancies, that I know of, charge such high rates, so as to cover all their fee and non-fee paying employees for this sort of thing.

Is it a simple uplift? Employee gets x, Umbrella sells to agency at x+£markup, agency sells to client for x+£markup+£another markup?

You are misunderstand how an umbrella works.

[pacontracting]

Hi

Umbrella workers are agency workers. We employ some on very high rates.

I know this because when we get comparator information back from the agency/client to comply with AWR, the perms are sometimes earning significantly less.

Thanks


Zeeshan

I'm curious - when you say Umbrella's have to pay SSP etc, and it's a cost of doing business, which part of the Umbrella business model (outside the Umbrella employee's income from the client) allows Umbrella's to fund such a cost?

Most consultancies, that I know of, charge such high rates, so as to cover all their fee and non-fee paying employees for this sort of thing.

Is it a simple uplift? Employee gets x, Umbrella sells to agency at x+£markup, agency sells to client for x+£markup+£another markup?

[DolanContractorGroup]

When in the past 20 years have their been agency workers sat next to employers with the agency workers earning more? There have been self employed contractors outside IR35 doing so but no agency workers were doing so until 2017.

And there are tribunals in progress from after the 2017 public sector changes just not being advertised as no-one wants to build hopes up or complete scare people.

Hi

Umbrella workers are agency workers. We employ some on very high rates.

I know this because when we get comparator information back from the agency/client to comply with AWR, the perms are sometimes earning significantly less.

Thanks


Zeeshan

[eek]

Perm workers had 20 years to do this, but nothing happened. Less of a point now when contractors' pay isn't even as high as it used to be.

When in the past 20 years have their been agency workers sat next to employers with the agency workers earning more? There have been self employed contractors outside IR35 doing so but no agency workers were doing so until 2017.

And there are tribunals in progress from after the 2017 public sector changes just not being advertised as no-one wants to build hopes up or complete scare people.

[DolanContractorGroup]

Agreed, however it's the term that's being popularised by a lot of commenters on IR35 and how it will essentially create this new class of worker.

This is where my colleagues are getting it confused. Taking the PSC out of the equation, in the case of working through an agency or through an agency-umbrella situation, it is the umbrella or agency that is the employer and must offer the same rights as the clients' employees? And the only place this can come from is the rate paid to the agency, therefore if you want the rights, you can have them but your take-home will be reduced accordingly?

Yes, the umbrella employer would have to ensure the agency worker is receiving at least the same amount of pay as a permanent comparator. Some rights ("day 1 rights") are the responsibility of the end client, as obviously the umbrella employer can't control who uses the end client's facilities.

If the rate being paid to the agency worker is less than a perm, the umbrella has to ask for an increase from the agency/end client, otherwise the assignment has to be terminated by them. The umbrella can't even put the worker onto a Swedish Derogation contract from April as regulations 10 and 11 are being revoked.

Things like SSP, etc are a cost of doing business for us. We do not charge workers for this.

As I said the interesting bit for me is if / when someone tries to push for the reverse - that because some agency workers are being paid far more than their permanent equivalents the permanent equivalents push for equal pay.

Perm workers had 20 years to do this, but nothing happened. Less of a point now when contractors' pay isn't even as high as it used to be.


Thanks

Zeeshan

[eek]

Agreed, however it's the term that's being popularised by a lot of commenters on IR35 and how it will essentially create this new class of worker.



This is where my colleagues are getting it confused. Taking the PSC out of the equation, in the case of working through an agency or through an agency-umbrella situation, it is the umbrella or agency that is the employer and must offer the same rights as the clients' employees? And the only place this can come from is the rate paid to the agency, therefore if you want the rights, you can have them but your take-home will be reduced accordingly?

The purpose of AWR is for lower paid people it ensures everyone is on at least an even footing - it removes the ability to pay an agency worker less than an employee which then removes any desire to replace employees with agency workers.

None of the rights the AWR offer really impacts a well paid contractor except the amount that needs to be withheld for holiday pay.

And it really only matters to us because agencies have screwed up how their advertise rates and display umbrella level rates when it should be a PAYE rate being displayed.

As I said the interesting bit for me is if / when someone tries to push for the reverse - that because some agency workers are being paid far more than their permanent equivalents the permanent equivalents push for equal pay.

[eatenrifles]

I should also mention that there's no such thing as a 'No Rights Employee'.

Agreed, however it's the term that's being popularised by a lot of commenters on IR35 and how it will essentially create this new class of worker.

The client is under no obligation to offer employment rights, and I would doubt any client will.

This is where my colleagues are getting it confused. Taking the PSC out of the equation, in the case of working through an agency or through an agency-umbrella situation, it is the umbrella or agency that is the employer and must offer the same rights as the clients' employees? And the only place this can come from is the rate paid to the agency, therefore if you want the rights, you can have them but your take-home will be reduced accordingly?

[DolanContractorGroup]

Oh goodie - Agency Worker Rights have appeared again

Anyone wish to scare the client they are currently working for?

If so I will begin.

AWR require the following:-


Now equal pay should (in theory) work both ways so what happens when the permanent member of staff asks why the inside IR35 contractor over there is bring paid 3 times as much money.

It's not something that has really mattered until now but Unions are rubbing their hands with glee...

I don't believe that AWR will be much of an issue for clients/agencies in light of the IR35 reforms. The rates of pay for inside-IR35 contractors are still above most permanent comparators from what I'm seeing.

Thanks

Zeeshan

[eek]

Oh goodie - Agency Worker Rights have appeared again

Anyone wish to scare the client they are currently working for?

If so I will begin.

AWR require the following:-

– If you are an ‘agency worker’ you have a right after 12 weeks service with a client to equal pay and equal working hours, rest breaks and holiday provisions, and the right to paid time off for ante-natal appointments, that a ‘comparable’ permanent employee of your client receives (full details in Appendix 2)

Now equal pay should (in theory) work both ways so what happens when the permanent member of staff asks why the inside IR35 contractor over there is bring paid 3 times as much money.

It's not something that has really mattered until now but Unions are rubbing their hands with glee...

[DolanContractorGroup]

I'm trying to explain to some colleagues how the No Rights Employee status comes about with regard to working through an agency on their PAYE if you're forced to by inside blanketing or PSC bans.

Their thinking is:

Scenario 1: You go on the agency payroll, You're an employee of the agency, but they supply you to the client. You're classed as an agency worker and AWR apply after 12 weeks?

Scenario 2: You go on the umbrella payroll, you're an employee of the umbrella, but the agency supplies you to the client. You're classed as an agency worker and AWR apply after 12 weeks?

I'm sure the above is wrong and you just get zero rights, but can anyone explain simply why you don't get any?

From government guidance my colleagues are assuming what was once a contractor will now be an agency worker so they should get employment rights from the client. I'm thinking it's more akin to a zero hours contract.

Hi

AWR will apply to inside-IR35 contractors, even if they're PSCs.

The guidance states:

The definition of an agency worker excludes those who are in a "profession or business undertaking carried out by the individual" where the hirer is a client of customer of the individual (i.e. a genuine business to business relationship). A profession is normally someone who is certified by a professional body such as a doctor or lawyer. Normally a professional or a person in business providing services to a client or customer is not working under that person's supervision or direction. But it is still possible for someone in a profession or in a business to be an agency worker if there is no such client or customer relationship.

Simply putting earnings through a limited company would not in itself put individuals beyond the possible scope of the Regulations.

Individuals may choose to do this for the sake of flexibility or for tax reasons. However, where the relationship between the individual, TWA and hirer remains, in essence, a tripartite relationship, and a hirer is not a client or customer of such individuals, they are likely to be in scope.

So, if you're not considered a genuine business, AWR applies.

BIS AWR Guidance

I should also mention that there's no such thing as a 'No Rights Employee'.

How could an umbrella afford employee rights out of the £70 month they get each month from your rate - lucky if they make a tenner per person after costs


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We, along with all other compliant umbrella's, pay things like SSP.

Their expectation is the client will be obliged to offer employment rights after 12 weeks per the AWR. Not sure if adding an umbrella to the mix changes the approach.

None of the post-April 6th contracts, T&C's etc. for those who are currently Ltd. Co. contractors have been revealed, so it's an unknown at the moment.

The client is under no obligation to offer employment rights, and I would doubt any client will. They could engage the contractors directly under contracts of employment which would lead to employment rights.


Thanks

Zeeshan

[GhostofTarbera]

Their expectation is the client will be obliged to offer employment rights after 12 weeks per the AWR. Not sure if adding an umbrella to the mix changes the approach.

None of the post-April 6th contracts, T&C's etc. for those who are currently Ltd. Co. contractors have been revealed, so it's an unknown at the moment.

Your employer is the umbrella not the end client

95% of clients are banning ltd company’s the other 5% soon will when they realise the risk


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[eatenrifles]

How could an umbrella afford employee rights out of the £70 month they get each month from your rate - lucky if they make a tenner per person after costs

Their expectation is the client will be obliged to offer employment rights after 12 weeks per the AWR. Not sure if adding an umbrella to the mix changes the approach.

None of the post-April 6th contracts, T&C's etc. for those who are currently Ltd. Co. contractors have been revealed, so it's an unknown at the moment.