Parasol and the questionable benefit of working through an umbrella

[Hackneyed]

Hi all,

Brand new to the forum and also brand new to contracting. This will also probably be my one and only contract and I will certainly never use Parasol again as they've been very poor in terms of dealing with my issue.

The main problem that I have is that the calculator they have on their site is at best wildly inaccurate, and at worst fraudulently misleading. Based on the calculations it gave me two months ago I decided to go down the umbrella route for my 4-month assignment (in-between jobs).

So what's up then you ask?

Well, the issue is that I have taken home roughly 58% of what I have billed. And that's on a daily rate of £130 or the equivalent of £34,000 p.a. As a comparison, the Parasol online calculator says that I should have taken home about £4101 (78.5%), which is a whopping £1065 difference! In two months!!

Yes, I am as puzzled as you are.

There is two more issues that affects the numbers that I need to disclose first though.

1. I am on emergency tax still (as I'm still waiting for my useless previous employer to sort that out).

The second issue is a little more complex. WHen I was set up, the agencie's intention was to pay me monthly but failed to provide instructions to Parasol. Parasol therefore set me up on a weekly schedule. When I subsequently billed on a monthly basis, Parasol took the payment as payment for one week only, meaning that I paid much mor employers NI than I otherwise would have. Now they are unable or unwilling to rectify this as they don't see that they have done anything wrong. But that's another issue and another thread.

So, the numbers.

I have worked for 8.5 weeks. In this time I have invoiced £5230 and taken home £3036 (58%). The deductions were in turn:
Gross pay: 5230 (100%)
Parasol margin: £247.50 (4.73%)
Employer cost: £532.50 (10.18%)
Tax (Paye): 1136.20 (21.72)
NI: 278.95 (5.33%)
Take home: £3036 (58%)


Now the million dollar question is of course - are those numbers even remotely correct?

Can someone who don't earn very much in the first place have so much deducted just by being tricked into going umbrella?

And is it ethical to give the illusion that you can get away with paying about 22.5% in tax on your gross income, when the reality is that you will most likely pay double that?

If you look at the numbers there you will see that an incredible 15% is deducted on the gross salary before it's even taxed (or has NI deducted)!!

Would be great to have your thoughts on this. I'm notifying Parasol that I'm leaving them tomorrow, as for the other issues (the one relating to the setting me up on a weekly schedule instead of a monthly one) I'll look into what action can be taken.

[The Spartan]

Parasol are without one of the worst Umbrella's you can use, plenty of people on here have had problems with them and their shoddy practices do a search and you'll see. Hopefully some of the threads may shed some light on where the money has been taken.

[Hackneyed]

Have noticed...

Spartan,

Did spend a bit of time last night trawling these forums and read that loud and clear. I wish I would have got on here before signing up with them. They're hard-balling me in every instance (Parasol, that is) and no willingness to offer any help or even advice.

I mean, over £1,000 in two months! That's just ridiculous..

[The Spartan]

I myself used them when I first started out and then noticed they where taking more than their 119.50 a month and classing it as employee costs. Like you and many others they were unable to offer any feasible explanation as to what the money was for so I left and went with contractor Umbrella. They have a salary calculator on their website which is quite accurate.

[Hackneyed]

...

Hi again Spartan,

Thanks for your advice. As I mentioned I've spent a bit of time on this forum last night and I'm aware of the slightly shady 'employers costs'. The 'other issue' I mention I'll write a separate post about, but that issue clearly affects the amount deducted as 'employers costs' and once I'm on a proper tax code I'll get some tax back, but what I'm really concerned about is that for someone like me who aren't earning £500/day but a meager £130/day, umbrella contracting seems to beMUCH more expensive than being employed directly.

Had I gone down the route of taking this role on a permanent basis I would have expected to pay roughly 24% on the gross income (invoiced amount).

But since Umbrella was banded about as a superior alternative for a contractor I decided to go for that.

In addition the calculator on the Parasol website led me to believe that I could expect to clear roughly 77.5% of my gross billings (based on the day rate of £130), or about £2,100. As I've mentioned, the reality is far far from that.

Lastly, when you're on a day-rate of £130 the margin that Parasol deducts represents nearly 5% of the gross earnings (the billed amount). Surely this fact alone would make it extremely unlikely that it could ever be advantageous to work through an umbrella unless you earn £300+/day. Something that no one's ever mentioned. I even had someone on the phone before I signed up who corroborated the numbers that their calculator gave me, he was obviously 'selling me'.

[LisaContractorUmbrella]

Hi again Spartan,

Thanks for your advice. As I mentioned I've spent a bit of time on this forum last night and I'm aware of the slightly shady 'employers costs'. The 'other issue' I mention I'll write a separate post about, but that issue clearly affects the amount deducted as 'employers costs' and once I'm on a proper tax code I'll get some tax back, but what I'm really concerned about is that for someone like me who aren't earning £500/day but a meager £130/day, umbrella contracting seems to beMUCH more expensive than being employed directly.

Had I gone down the route of taking this role on a permanent basis I would have expected to pay roughly 24% on the gross income (invoiced amount).

But since Umbrella was banded about as a superior alternative for a contractor I decided to go for that.

In addition the calculator on the Parasol website led me to believe that I could expect to clear roughly 77.5% of my gross billings (based on the day rate of £130), or about £2,100. As I've mentioned, the reality is far far from that.

Lastly, when you're on a day-rate of £130 the margin that Parasol deducts represents nearly 5% of the gross earnings (the billed amount). Surely this fact alone would make it extremely unlikely that it could ever be advantageous to work through an umbrella unless you earn £300+/day. Something that no one's ever mentioned. I even had someone on the phone before I signed up who corroborated the numbers that their calculator gave me, he was obviously 'selling me'.

If you are not entitled to claim expenses, for whatever reason, and there is no uplift in the rate offered to you by the agency to work through an umbrella or your own limited company, you would be better off working direct for the agency on their books

[Hackneyed]

Thanks Lisa.

I actually forgot to mention that I submitted about £140 worth of expenses for the month of June. They would have been included in the sums above. That means, I suppose, that had I submitted no expenses at all, the numbers would have been even more disadvantageous for me!!!

Seems like it's an expensive lesson I've just 'earnt' myself - and the practices of having a calculator to market the services which is clearly so off the mark that it quite frankly should fall under criminal deception... well, I lack words.

I might well see if there is any legal recourse based on this fact alone.

[LisaContractorUmbrella]

Thanks Lisa.

I actually forgot to mention that I submitted about £140 worth of expenses for the month of June. They would have been included in the sums above. That means, I suppose, that had I submitted no expenses at all, the numbers would have been even more disadvantageous for me!!!

Seems like it's an expensive lesson I've just 'earnt' myself - and the practices of having a calculator to market the services which is clearly so off the mark that it quite frankly should fall under criminal deception... well, I lack words.

I might well see if there is any legal recourse based on this fact alone.

The calculator on any umbrella company website should be accurate, it should advise whether or not the standard tax code for that year is being used in the calculations and it should ask for you to enter expenses and should clearly state if a level of expenses are being assumed in the calculation.

[Hackneyed]

In the other thread I refer to having used your calculator. The result are less than encouraging but transparent and honest (in my experience).

The main point is that had I ever even suspected that I would be paying even a few percent more in tax and fees going through an umbrella, let alone 15%+ more, I would have gone with a direct contract.

As it stands, this lesson will have cost me in the region of £1,500 when the contract is up. A very expensive lesson indeed!!!!!

[LisaContractorUmbrella]

In the other thread I refer to having used your calculator. The result are less than encouraging but transparent and honest (in my experience).

The main point is that had I ever even suspected that I would be paying even a few percent more in tax and fees going through an umbrella, let alone 15%+ more, I would have gone with a direct contract.

As it stands, this lesson will have cost me in the region of £1,500 when the contract is up. A very expensive lesson indeed!!!!!

This is one of the reasons that rates for contractors i.e. those working through an umbrella or a PSC tend to be much higher than PAYE through an agency. An umbrella company has to take on all the employment responsibilities from the agency and that includes paying employer's national insurance which is currently 13.8%. Therefore if there is no rate uplift the agency will be considerably better off as they have passed on all their financial and legal employer responsibilities to an umbrella company - the worker will be worse off as those costs still have to be borne.