Reply to: Selecting Umbrella for my PAYE contract

[lucyclarityumbrella]

Point them at Holiday entitlement: Taking holiday before leaving a job - GOV.UK

Absolutely, it needs to come back to you - otherwise it's an unlawful deduction of earnings!

[soln]

@BABABlackSheep, thanks for your feedback on Paystream.

@northernladuk, I would like to thank you as well for patiently replying to my queries. It is much appreciated. I learnt more here than from the Agency who asked me to reach out to each Umbrella companies as they (and also client) have no information on their offering but have selected them

They have also give me a deadline to respond back by lunchtime so will take the plunge with Paystream for next 4 months.

[northernladuk]

Agency came back this morning that client allows only the below Umbrellas :-

• Danbro
• Focused Umbrella
• Paystream

However they need more than a week to process as they assumed I will go PAYE till now. This would I will be unpaid for few days. But good news is they will pay me the 11 accrued holidays which I have not used.

Now obvious question is how good these Umbrellas are and whether Pension by Salary Sacrifice are supported by them. I also read that some do not allow contribution into my SIPP and may obstruct transfer to my SIPP when I want to leave them.

Ughh.. That's like asking you which foot you'd like shooting in first.

We have this question asked a lot so best thing to do is do a search on the forums for the company name and see what's been said. To do this type <company name> site:contractoruk.com/forums in to google.

[BABABlackSheep]

If I have to go back to brolly then I’m going with Paystream.

Very nice and helpful staff.

You can contribute into your SIPP. Its salary sacrificed.

I know others with them, no problems.

[soln]

You will be under the umbrellas PI and other insurance. You don't need them yourself.

The rate for the brolly should be different.

Agency came back this morning that client allows only the below Umbrellas :-

• Danbro
• Focused Umbrella
• Paystream

However they need more than a week to process as they assumed I will go PAYE till now. This would mean I will go unpaid for few days. But good news is they will pay me the 11 accrued holidays which I have not used.

Now obvious question is how good these Umbrellas are and whether Pension by Salary Sacrifice are supported by them. I also read that some do not allow contribution into my SIPP and may obstruct transfer to my SIPP when I want to leave them.

[northernladuk]

You will be under the umbrellas PI and other insurance. You don't need them yourself.

The rate for the brolly should be different.

[soln]

There is always a fee to pay. When I had the option of agency PAYE or Umbrella the rates were slightly different. I very much doubt you are getting the agency to run your PAYE for free so I'd double check that.

Some brollies will allow you to pay in to your existing pension. Not sure if Clarity does. And I'd check about the holidays as well.

Lucy.. can you help here?

That is a good point on the Agency PAYE and Umbrella rates. So far I have only been quoted a Base Day Rate from which they deduct holiday pay before calculating my day rate before employee income tax and national insurance. Employer's NI and Apprentice Levy are being paid to Agency on top by client.

Weirdly I have been asked for the Insurance (Professional Indemnity/Public Liability/Employers Liability) if I go Umbrella. Luckily I have not cancelled my existing Insurance but it runs out mid-November so will need to account for that costs as well. Not sure if that is standard even though I will not be using my Ltd. Co.

I missed considering saving on the Employer's NI when contributing into Pension via Salary Sacrifice. Now I am kicking myself for making a £20K personal pension contribution into my SIPP as I always considered 2% saving of Employee NI.

[northernladuk]

They have not given me a list of Umbrella Companies so assume I can choose mine. I believe that the contributions are still capped at £40k per year as annual allowance out of which I have already put in £20K into my SIPP to recover some tax paid for this tax year.

Even though I save 2% NI by salary sacrifice arrangements, the downside is I need to use the Umbrella Companies Group Pension Scheme which usually has a 1-1.5% annual management fee whereas I have a fixed fee SIPP.

For my case, the only real benefit I see from Umbrella Company is the possibility of retaining holiday pay to be paid at end of year (or paid every month). However even that too is limited as I will accrue 11 holidays till end of year from which I need to take 10 consecutive leaves (including bank holidays) and hence that leaves a maximum of 3 holiday pay if I take the 10 leaves during Christmas.

Staying with my Agency payroll means I can take my leaves anytime and also possibly not lose my 10 accrued leaves. There are no Umbrella fees to pay as well.

This mess could have been avoided if my Agency allowed me to select an Umbrella company during April - but it was lockdown so options available were limited

There is always a fee to pay. When I had the option of agency PAYE or Umbrella the rates were slightly different. I very much doubt you are getting the agency to run your PAYE for free so I'd double check that.

Some brollies will allow you to pay in to your existing pension. Not sure if Clarity does. And I'd check about the holidays as well.

Lucy.. can you help here?

[soln]

They do or they allow you to do it? You'd be better going for a brolly that allows you to make unlimted contributions to a good scheme. You can save fortune in tax/.


Speak to Clarity Umbrella. Lucy posts on here alot. She will give you a breakdown of how much you will take home. When I got offered agency PAYE or brolly I was not only better off on brolly but the unlimited pension contributions could have saved a crap load of tax.

They have not given me a list of Umbrella Companies so assume I can choose mine. I believe that the contributions are still capped at £40k per year as annual allowance out of which I have already put in £20K into my SIPP to recover some tax paid for this tax year.

Even though I save 2% NI by salary sacrifice arrangements, the downside is I need to use the Umbrella Companies Group Pension Scheme which usually has a 1-1.5% annual management fee whereas I have a fixed fee SIPP.

For my case, the only real benefit I see from Umbrella Company is the possibility of retaining holiday pay to be paid at end of year (or paid every month). However even that too is limited as I will accrue 11 holidays till end of year from which I need to take 10 consecutive leaves (including bank holidays) and hence that leaves a maximum of 3 holiday pay if I take the 10 leaves during Christmas.

Staying with my Agency payroll means I can take my leaves anytime and also possibly not lose my 10 accrued leaves. There are no Umbrella fees to pay as well.

This mess could have been avoided if my Agency allowed me to select an Umbrella company during April - but it was lockdown so options available were limited

[soln]

Point them at Holiday entitlement: Taking holiday before leaving a job - GOV.UK

I will ask but they might argue that I am not technically leaving the contract mid-way but finishing the contract during which I was able to take the accrued holidays.

They are putting me on new contract on my request to change "title" which reflects my current role. I still need to take mandatory 2 weeks consecutive leave out of 11 accrued holidays till end of year and hence using "Umbrella company" may only benefit by getting holiday pay for few days.

[eek]

The contract I signed says that the holidays need to be taken by end of year else I lose it. However as my original contract was only till 31 July (extended till 10 August) I accrued 10 holidays which is now too late for me to take. Technically if I continue on Agency's payroll I might still be able to take those holidays but they are clear that I cannot be paid in lieu.

Point them at Holiday entitlement: Taking holiday before leaving a job - GOV.UK

[soln]

The law is clear about Holiday pay - it needs to be paid either when you take holiday or where holiday isn't taken it should be paid as part of the final payment. If an agency hasn't paid you deducted holiday payments you can (and should) claim the money back.

The contract I signed says that the holidays need to be taken by end of year else I lose it. However as my original contract was only till 31 July (extended till 10 August) I accrued 10 holidays which is now too late for me to take. Technically if I continue on Agency's payroll I might still be able to take those holidays but they are clear that I cannot be paid in lieu.

[soln]

They do or they allow you to do it? You'd be better going for a brolly that allows you to make unlimted contributions to a good scheme. You can save fortune in tax/.

Speak to Clarity Umbrella. Lucy posts on here alot. She will give you a breakdown of how much you will take home. When I got offered agency PAYE or brolly I was not only better off on brolly but the unlimited pension contributions could have saved a crap load of tax.

The current forms did not give me a list of Umbrella companies so assume that I can choose my own.

I believe that the contributions are still limited to annual allowance of £40k from which I have already contributed £20k into my SIPP for this tax year to recover tax paid for last 4 months. Whether I contribute the remaining £20K into my SIPP or use Umbrella company to do it, the difference is only the 2% NI saved.

[eek]

Hi

Using Agency Payroll is good in the sense that they pay weekly (less credit risk) and also contribute the minimum Pension contribution (though paltry) on top of my day rates. However they deduct 14% as holiday pay and use that to pay for any holidays I take. If I take no holidays by end of year, the holiday pay is lost and not paid.

The law is clear about Holiday pay - it needs to be paid either when you take holiday or where holiday isn't taken it should be paid as part of the final payment. If an agency hasn't paid you deducted holiday payments you can (and should) claim the money back.

[northernladuk]

Using Agency Payroll is good in the sense that they pay weekly (less credit risk) and also contribute the minimum Pension contribution (though paltry) on top of my day rates. However they deduct 14% as holiday pay and use that to pay for any holidays I take. If I take no holidays by end of year, the holiday pay is lost and not paid.

They do or they allow you to do it? You'd be better going for a brolly that allows you to make unlimted contributions to a good scheme. You can save fortune in tax/.

Now at time of renewal they have given option to go via Umbrella. Is it fair to say that I can ask Umbrella Company to pay me the holiday pay every month and not retain it ? Also I presume that they can do a salary sacrifice and save the 2% NI though last month I made a 20K contribution to my SIPP for recovering tax already paid.

I am trying to make up my end as there is a fee to pay to Umbrella Company and also the fact that by switching to Umbrella company I lose my 9 holidays which I accrued from April.

Speak to Clarity Umbrella. Lucy posts on here alot. She will give you a breakdown of how much you will take home. When I got offered agency PAYE or brolly I was not only better off on brolly but the unlimited pension contributions could have saved a crap load of tax.