Clauses on Umbrella Contracts

**DolanContractorGroup** · 10 July 2020, 12:16

Originally posted by PM Runner View Post

Hi All

Welcome any advice the forum members can give on contract clauses for an Umbrella Company contract I'm due to sign:

- I'm new to Umbrella Company contracts

- I'm due to start a new contract on Monday - public sector, inside IR35, agency advised contract needs to go via an UC

- Have chosen one - sent in registration form

- I will only sign one contract, with the UC

Hi PM Runner

They're all pretty standard clauses that you'll find in many umbrella contracts.

- Agency will issue a Schedule Agreement to the UC, which the UC will only share with me if the agency gives them GDPR consent - seems a bit convoluted given the Schedule AGreement is referred to in the proposed contract - but so be it I guess

Not sure why GDPR is relevant here. In most cases the only thing that should concern the worker is the assignment schedule, and if that has all of the details (e.g. pay rate, contract dates, notice period, payment terms, etc) then the terms between the umbrella company and the agency/client shouldn't be worried about.

I've been reviewing the contract clauses, and have found a couple of things I need advice on please:

- Clause referring to extending the UC's business (?), worded as follows:
" Your responsibilities include an ongoing duty to use your best endeavours to develop and extend our business, and to take all necessary steps to source new business for us in the form of suitable Client Assignments for you to perform under contracts between us and third parties."
Is this normal? Never heard any reference to this before during negotiations with the UC

This falls under the MOO (mutuality of obligations) category where a genuine employer-employee relationship needs to be demonstrated.

It just means that good work conduct is expected from workers so that agencies and clients can give you more work, if that is your goal. This section indicates that the umbrella business works by having workers on client assignments, and without this happening, they can't provide a service to their agency or client partners.

It doesn't expect you to spend time or resources other than that which you already spend on the assignment.

- "You may be required to spend up to one week (35 hours) or such longer period as we may require after each Client Assignment as a Sourcing Assignment on efforts to source new business for us in the form of your next Client Assignment. You will be paid for such time as we require you to spend on a Sourcing Assignment."
Again, not sure why this is there or why I'm supposed to sign up to this

Again deals with MOO.

HMRC wants the umbrella employer to satisfy certain conditions for the umbrella contract to be overarching (e.g. be in use for multiple assignments), and so some conditions of employment are present even when there is no active assignment.The section states that if you have finished your assignment and wanting to work further, you would be expected to search for other work (which in essence is sourcing new business for the umbrella employer), and they may pay you for the time spent looking for this work. It doesn’t intend to affect your current assignment, or hinder your ability to look for further work.

Many workers tend to find another assignment without any break, and others take time off and so are unavailable for further work. Any discretionary payments are generally at the prevailing NMW/NLW rate.

- " Salary: We will pay you at the applicable National Minimum Wage (or, if applicable, the National Living Wage) rate, to commence when the first Client Assignment commences, for all hours actually worked on Assignment, subject in all cases to you complying with all applicable Company procedures and requirements.
Commission: To the extent that your gross taxable pay (excluding holiday pay) exceeds your salary (calculated at the applicable National Minimum Wage (or, if applicable, the National Living Wage) rate, it constitutes your commission which is identified separately on your payslip."
This seems a strange way to refer to pay - I would just expect this to refer to the gross daily rate I've agreed with the headhunter...?

National Minimum Wage is used for two reasons: the umbrella employment model incorporates legitimate business expenses, and so we can make employment deductions and still pay our workers the remaining element of their pay, the discretionary profit share bonus.
When expenses are applied (if applicable) to a worker’s pay, the employer can only lower their pay to NMW. It cannot go lower than this legally. So, as NMW is a defined limit, this is used as the base pay that the worker will receive for all hours worked.

Further, an employment contract, or statement of employment, has to state the employee’s pay. As each and every employee of maybe on a different rate, it may not be possible to keep track of hundreds or thousands of different contracts and so everyone is put on the same contract and paid the same amount (makes things a bit easier for payroll too!). Employees also pay tax/NI, and a margin needs to be deducted from the agency’s invoice. Once these things have been accounted for, the umbrella can then pay what is left over from the agency invoice to you as your bonus.

- "Your holiday entitlement will accrue at the rate of 12.07% of your hourly rate for each hour worked, holidays will be paid your normal hourly rate"
I've asked for my holiday pay *not* to be retained, and to be paid directly to me as part of my day rate - so this shouldn't be there

The accrual statement here shouldn't affect the practical side of it. The holiday pay will accrue as you work, and whether you have it paid as part of your weekly/monthly pay or have it retained doesn't change this. Just make sure that your umbrella knows to pay with each payrun.

- "Nothing in this section shall prevent us from terminating the employment without notice and without making payment in lieu of notice, where we are justified in so doing"
Does this say that they the UC can terminate without notice, "if they are justified in so doing"? Who determines what is deemed as justifiable reasons for termination without notice? I've agreed a 2 week notice period with the headhunter

Yes, termination without notice can happen where gross misconduct has occurred. Obviously this will only happen where something significant happens. Best to ask them for examples.

Your notice period with your agency is unrelated to the notice period of employment. They're two different things.

- "Other work
You must devote the whole of your time, attention and abilities during your normal working hours on a Client Assignment to your duties under this Contract of Employment, and you may not under any circumstances during those hours whether directly or indirectly, undertake any other duties, of whatever kind;
If you identify an opportunity of new business for us in the form of a suitable Client Assignment for you to perform, you will refer it to us, in accordance with clause XXX.
We do not seek to restrict what you do outside your normal working hours. However, to ensure we at all times have accurate up to date information as to your ongoing availability for work, you must notify us before taking any employment with a third party, or engaging in any way in any other business activity, and keep us informed on an ongoing basis of any periods during which you are committed to such other employment or business activity."
I don't want to have to inform them of other work I do outside of the agreed working hours - not see why it's any of their business. I am aware that often employers put these non-competition clauses in, but this shouldn't be in an UC contract given there are no competition concerns as long as I do the agreed work during the agreed contract hours

This section just provides a bit of protection for the employer on the chance your other work conflicts with your assignment, as the agreement they sign with the agency/client would be protecting the agency/client also. In my experience, other work has never affected the umbrella employment and you should just let them know and they'll probably be fine with it.

- "By accepting this contract you are advising that you wish to opt out of the Working Time Regulations 1998. This gives you the freedom to work more than 48 hours in a week if you wish"
What do you suggest - do you tend to opt in or out of the WTR 1998 limit of 48 hours/week?

Ideally, this is laid out separately in an annex. That's how we do it, so workers that want that protection would still have it even after joining us.

Most opt out with no detriment to them. Hours are agreed between the worker and agency beforehand anyway, so it's not really an issue.

I'm considering whether to have the contract reviewed by a solicitor, but the solicitors I have used before aren't used to Umbrella Company contracts - perhaps I'm over-reacting given this is a type of contract I'm not used to.

I guess I'm slightly paranoid as my previous contract as a Sole Trader had a lot of contentious clauses that I wasn't happy to sign up to (like a Pay When Paid Clause).

Thanks for any hints you can give

PM Runner

Hope the above helps.

If you've got any other concerns about umbrella employment, just give me a shout.

Thanks

Zeeshan

**PM Runner** · 14 July 2020, 08:17

Originally posted by DolanContractorGroup View Post

Hi PM Runner

Hope the above helps.

If you've got any other concerns about umbrella employment, just give me a shout.

Thanks

Zeeshan

That's really helpful Zeeshan - thanks so much. I've since had an employment solicitor review the contract and most of the answers you gave are aligned to theirs, though I have had some clauses modified or removed that I wasn't willing to sign up to. I'll see whether how they respond and then decide on that basis.

**LondonManc** · 14 July 2020, 08:52

I can understand about the extra work clause - I'd imagine that it's there for a few different reasons:
To make sure that you're physically and mentally capable of doing their job to the best of your ability, i.e. not wearing yourself out at another client for another 30 hrs/week
To minimise the risk of IP theft/conflict of interests if you work for a competitor too.
So that you won't be unavailable for their client despite the MOO clause.

Clauses on Umbrella Contracts