Reply to: Apprentice Levy

[cojak]

Perhaps I was thinking of something like this!

Firm claimed to "maximise your pay" while taking sneaky deductions - Andrew Penman - Mirror Online

Paystream. Why am I not surprised?

[LisaContractorUmbrella]

Very good point, but why do umbrella's not have this risk? I guess they do, hence why Paystream recently got clobbered by a tribunal.

Exactly; we run the same risks as any other employer

[Waldorf]

Simply because I don't think the agency would want to do it because there is always the risk of employment costs being enforced as a result of a tribunal decision

Very good point, but why do umbrella's not have this risk? I guess they do, hence why Paystream recently got clobbered by a tribunal.

[CoolCat]

what the political class in parliament need to do is decide under what legal framework they would prefer freelancers to operate, whether they can indeed claim expenses like employees of a big consultancy would, and so on, and then endorse that model properly. at the moment they don't like one man band limited companies, and they don't like umbrellas, they really need to be asked what model do they want freelancers to use.

the current shambolic political swaying in the wind is a mistake.

the economy needs to make it easier for people to become freelancers, to use the model, and to use that style of engagement, even if only for 6 months between permie jobs. a flexible workforce is what we need, not a workforce tied up in red tape and nonsense.

[LisaContractorUmbrella]

Lisa, I can agree with your comments, but why would a contractor pay for a payroll bureau service, surely this would/should be provided and therefore paid, by the agency?

Simply because I don't think the agency would want to do it because there is always the risk of employment costs being enforced as a result of a tribunal decision

[LisaContractorUmbrella]

Turnover £34 million
Gross Profit £766k
Profit after tax £60k

Ouch.

I was looking at one umbrella-type company that made profits of £6 million on their turnover of £696 million in recent years. Nice payout for the two directors though.

Ouch indeed The costs of running a compliant umbrella company are astronomical these days unfortunately

The company you're referring to probably has other sources of income I would think

[TheFaQQer]

Umbrella companies have become far less financially viable over the years as bank interest has plummeted and costs of employment have sky rocketed; the next raft of legislation changes mean that, if we are to survive, the model has to change.

Turnover £34 million
Gross Profit £766k
Profit after tax £60k

Ouch.

I was looking at one umbrella-type company that made profits of £6 million on their turnover of £696 million in recent years. Nice payout for the two directors though.

[LisaContractorUmbrella]

I did tentatively start a new thread since it is a way off Apprentice Levy.

http://forums.contractoruk.com/umbre...in-ers-ni.html

But yes, if it stands they it all has to go back to the "bureau". In effect it will be the "temp agency" model without the agency finding the work. Or perhaps Agencys will become the bureau and take clients PAYE removing their choice (agency's don't want this of course).

In effect the final result is that you £25 fee goes up to £225 (or whatever) to account for the Er's NI etc.

It would all depend on whether or not the legislation that's introduced for the levy will cover payroll bureaux - if it does then I would suggest that we will just see a return to the old MSC model with workers being paid PAYE through PSC's under the umbrella of the management company. Whatever happens I can see lots more avoidance schemes emerging from the wordwork and HMRC ending up in a right old pickle trying to police everything

[Waldorf]

Lisa, I can agree with your comments, but why would a contractor pay for a payroll bureau service, surely this would/should be provided and therefore paid, by the agency?

[ASB]

I did tentatively start a new thread since it is a way off Apprentice Levy.

http://forums.contractoruk.com/umbre...in-ers-ni.html

But yes, if it stands they it all has to go back to the "bureau". In effect it will be the "temp agency" model without the agency finding the work. Or perhaps Agencys will become the bureau and take clients PAYE removing their choice (agency's don't want this of course).

In effect the final result is that you £25 fee goes up to £225 (or whatever) to account for the Er's NI etc.

[LisaContractorUmbrella]

I think what is most likely is that the umbrella model will move from umbrella employer to payroll bureau - pretty much back in time. The net effect of this is that workers will be taxed as employees i.e. via PAYE but will not be employed. This will mean that workers will lose the rights of employment that they have now and I think the end result will be that the low paid will gradually move back into permanent employment with the move being driven by the Unions (who have already tabled a motion that umbrella companies should be banned in the construction industry).

Umbrella companies have become far less financially viable over the years as bank interest has plummeted and costs of employment have sky rocketed; the next raft of legislation changes mean that, if we are to survive, the model has to change.

I don't think it will matter to you lot on here but I do think that the low paid workers that have flooded into umbrella companies will be lost from the sector which will pretty much achieve what HMRC intended.

Umbrella companies and PSC's will always exist in one form or another because companies will always need contractors but I think the market place will look very different in 12 -24 months time - what does the panel think?

[ASB]

Perhaps I was thinking of something like this!

Firm claimed to "maximise your pay" while taking sneaky deductions - Andrew Penman - Mirror Online

Somebody else linked to that elsewhere. Curious, I don't know the details of the case but it is interesting that it mentioned, quite specifically, employers national insurance.

I can only suppose it was a very badly written contract.

Quite clearly if the underlying costs for holiday pay, employers NI etc cannot be "worked into" your salary from your revenue generated then the umbrella model is dead. As is all temp work etc.

[Waldorf]

The gross billings which it will be being deducted from are not pay.

If employer national insurance were to go up by 5% would you expect pay to change ?

No, is the obvious - but sadly wrong - answer. As a permie my pay wouldn't change. But, anybody who is in any form of umbrella arrangement it will. After all the employer isn't going to be able to survive very long if it's entire operating costs are to be funded for its 25 quid fee.

You are quite right about unauthorised deductions from pay not being allowed, but that is pay after deductions. This will come out of billings before the deductions.

Perhaps I was thinking of something like this!

http://www.mirror.co.uk/news/firm-cl...ur-pay-6818487

[AtW]

I was referring to something to do with unauthorised deductions from an employees pay, similar to the restrictions on deductions for breakages, errors etc. I would have thought that a tax on the employer could not be passed onto the employee, however I am not an expert on this area.

They won't pass the tax, they'll just charge their own extra fee (plus more for the hassle), so in effect you'd still get this tax passed onto you plus some extra money. Welcome to the pro-business Tory Govt.

[ASB]

I was referring to something to do with unauthorised deductions from an employees pay, similar to the restrictions on deductions for breakages, errors etc. I would have thought that a tax on the employer could not be passed onto the employee, however I am not an expert on this area.

The gross billings which it will be being deducted from are not pay.

If employer national insurance were to go up by 5% would you expect pay to change ?

No, is the obvious - but sadly wrong - answer. As a permie my pay wouldn't change. But, anybody who is in any form of umbrella arrangement it will. After all the employer isn't going to be able to survive very long if it's entire operating costs are to be funded for its 25 quid fee.

You are quite right about unauthorised deductions from pay not being allowed, but that is pay after deductions. This will come out of billings before the deductions.