Parasol - Employment Costs - extra charges??

[Goatfell]

Interesting. Parasol's response to Spartan states "Clause 3.1 confirms that whilst on assignment, you will be entitled to be paid basic pay for the hours that you work. For clarity, basic pay is a sum per hour at the rate of National Minimum Wage in force from time to time and not including any advance payment of PBA or Commission."

Hence I should imagine that the best you'd get from Parasol would be National Minimum Wage, because of the clever way that they've set up the pay arrangements, although I'd guess they're not atypical compared to most other umbrellas from this perspective.

So they are saying that you are working for NMW?

Is the difference between your rate and NMW classed as "advance payment of PBA or Commission"?

How PBA can be paid in advance as part of your remuniration?

Sorry for all the questions, but this isn't something I've come across before, when I was working through a brolly gross was called "income from assignment", and net was "Salary". It looks like a scam to get round the requirement to pay at least 50% of the assignment pay or NMW, whichever is the greater for 4 weeks.

Or am I still (quite probably) missing something?

[LisaContractorUmbrella]

Lisa, I think it is telling that you did not respond to my other points - even at the min wage, a 4 week break will cost the umbrella company more than a £1000 - I just cannot see how they can fund that from their fees.

Lisa, you must be relying on the basis that very few will claim, seems quite a risk.

Sorry, not intentional but I do have an umbrella company to run as well as posting on CUK The legalities of operating a Swedish Derogation Contract are extremely complex and is high risk for the umbrella company as your processes have to be set up incredibly carefully but all brollies have had this responsibility for a number of years - it's nothing new as pay between assignments is a requirement of an overarching employment contract; to confirm any such payment is funded from the brolly's margin

[ADRIANL]

There are 2 separate issues that are being discussed here.

Firstly, pay between assignments. Whilst people express outrage at Umbrellas not picking up the tab we need to look at the reality. Umbrella companies' charges average approximately £20 per worker per week. The average net profit of a successful Umbrella company would be 20%, therefore £4 per worker per week. If after 12 weeks (and it could be sooner) the worker has a period between assignments the minimum liability would be 4 weeks of NMW, or approximately £1000. Therefore profit earnt £48, PBA payout £1000. No-one can run a business on this basis. The end users or the agencies should be footing the bill but refuse to do so, simply passing the liability down to the Umbrella. Hence any sane Umbrella company (like us at planIT) will have to avoid this liability. It may be unpalatable but it is the truth. I have been in this business for 16 years and seen the litany of failed Umbrella companies who thought they could "buy" business. It doesn't work.

Secondly, Employers costs. Since Parasol are a competitor,I would be interested to see the outcome of any employment tribunal, but I am pretty confident they would win. A payslip needs to show tax and national insurance that is deducted from wages. Employers NI is not deducted from wages - look at any payslip from any employer in the country, Employers NI won't feature. What most Umbrellas do is give you a reconiciliation between what they receive (for your services) and what they pay you as wages. The Employers NI is within that reconcilation but there is no legal obligation to provide that detail at all. The fact that Employers costs may be greater than just Employers NI could be construed as misleading - if a worker was told that Employers costs did comprise solely Employers NI - but I would suggest that this is not the case. At the end of the day the Umbrella can take whatever margin it chooses, if the worker agrees to those contractual terms.

[Wary]

ADRIANL – thanks for your interesting take on this, in particular the legality of what Parasol are doing.

Re your first point, I’m from a breed of contractors who feels that I should pay for my own time off; I wouldn’t expect or indeed want someone else to foot the bill out of their own pocket. I fully understand and accept why an Umbrella would want to minimise these additional costs and also pass them on to their contractors in order to operate a viable business model.

The issue people have with Parasol (and they’re not the only ones) is that it is not being done in a fair, consistent or transparent manner, and according to Parasol’s own predictions back in June, these additional deductions would appear to be way in excess of their true additional overheads. They could easily have just increased their fee instead, which in order to cover their AWR costs would be “pence not pounds”. Regardless of the technical legalities, surely there’s a moral issue here too?

Can I ask how your company are covering these additional overheads? Are you arbitrarily levying additional charges based on expenses Parasol-style, have you increased your fee or are you simply taking the hit?

[Nixon Williams]

Firstly, pay between assignments. Whilst people express outrage at Umbrellas not picking up the tab we need to look at the reality. Umbrella companies' charges average approximately £20 per worker per week. The average net profit of a successful Umbrella company would be 20%, therefore £4 per worker per week. If after 12 weeks (and it could be sooner) the worker has a period between assignments the minimum liability would be 4 weeks of NMW, or approximately £1000. Therefore profit earnt £48, PBA payout £1000. No-one can run a business on this basis. The end users or the agencies should be footing the bill but refuse to do so, simply passing the liability down to the Umbrella. Hence any sane Umbrella company (like us at planIT) will have to avoid this liability. It may be unpalatable but it is the truth. I have been in this business for 16 years and seen the litany of failed Umbrella companies who thought they could "buy" business. It doesn't work.

Adrian

As you know we do not operate an umbrella company but your description is also my understanding. I cannot see how an umbrella can fund this cost from its margin.

I understand that some umbrella companies had planned to get around these rules by simply funding pay of just 1 hour per week, I can see that amount could be funded from margin, but not the new legally required amount of 4 weeks NMW.

Alan

[ADRIANL]

Wary

At planIT we are doing the following:

1. We are happy to work on a match permanent pay basis if the end user is paying enough, after agency and our margins, and can demonstrate the same. Unfortunately at the lower end of the market this is not happening.

2. With a derogated contract we are advancing an element of pay between assignments, on a similar basis to rolled up holiday pay. The difficulty here is knowing how much to prepay. In actual fact you can only know with the benefit of hindsight which, even at planIT, we don't have! Therefore we will be left with an exposure.

3. The exposure is partly self insured and partly provided for within Employers costs. It would of course be easier just to increase our fees but, unfortunately,unless our competitors did likewise we would be accused of being "overpriced" and lose market share.

4. The main part of our business, Personal Service Companies, continues to expand as a result of agencies and contractors wanting to sidestep all of these issues.

[LisaContractorUmbrella]

Adrian

As you know we do not operate an umbrella company but your description is also my understanding. I cannot see how an umbrella can fund this cost from its margin.

I understand that some umbrella companies had planned to get around these rules by simply funding pay of just 1 hour per week, I can see that amount could be funded from margin, but not the new legally required amount of 4 weeks NMW.

Alan

I can confirm, just for the record, that we don't operate a 1 hour or zero hour contract

[Nixon Williams]

I can confirm, just for the record, that we don't operate a 1 hour or zero hour contract

No, but some of your competitors were considering this as an option to get around the AWR rules.

[LisaContractorUmbrella]

No, but some of your competitors were considering this as an option to get around the AWR rules.

They certainly were NW and I think a few of them decided it was a good idea

[Wary]

3. The exposure is partly self insured and partly provided for within Employers costs. It would of course be easier just to increase our fees but, unfortunately,unless our competitors did likewise we would be accused of being "overpriced" and lose market share.

I presume from this that planIT is taking additional money from their contractors as "Employer Costs" above & beyond the weekly fee? If so, how is this calculated and how are these additional deductions communicated to your employees - e.g. how is it depicted on the payslip? Is it combined with Employers NI as a single "Employer Costs" entry?