If you are new to contracting or new to working with an umbrella payroll company then you may have some questions regarding how it all works.
We’ve put together a selection of our most frequently asked questions to help save you time and for your peace of mind. We’ve tried to cover everything you need to know, but if you can’t find the answer you’re looking for, our experts are here to help.
What are the benefits of using an Umbrella?
As an employee of Payments Pro Umbrella Payroll, you benefit from continuous employment rights. These include sick pay, holiday pay, references, a pension, timely payments you can rely on, perk and reward schemes and more.
By going on to a PAYE scheme you can rest assured that all of your HMRC contributions are paid compliantly and on time.
Am I affected by IR35?
If you work for a company on a regular basis you are legally regarded as an employee of said company even if you are on a flexible or fixed term contract. This also applies if you are contracted by an agency to work for other companies. The bottom line is that you are now responsible to pay the same tax and contributions as people employed in full time positions.
If you are still unsure if you come under IR35 you can use this tool setup by the HMRC which can be used to determine employment status for contractors in the public or private sector. The HMRC states that it will stand by the result of any test, “unless a compliance check finds the information provided isn’t accurate.”
Am I self-employed or employed?
When working through Payments Pro Ltd, we technically employ you, and you work as a PAYE employee. This means that you receive all of the employment rights and protection of someone working in full-time employment.
Do I need to file a self-assessment tax return?
All of our employees payments are declared under pay-as-you-earn tax (PAYE); which means all of your tax and NI will have been declared and deducted. This means you will not normally need to file a self-assessment tax return. There are however some exceptions to the rule whereby you will have to if:
- You have an income over £100k
- You have other income such as investment income, rental income and capital gain etc.
- You are requested by HMRC to file a personal tax return.
When should I give in my timesheets?
This depends on the policy set by your agency, you’re normally required to give your timesheets to your agency as per your payroll frequency. Your Client Experience Manager will confirm the exact procedure with you once you have signed up with us.
What expenses can I claim for?
This depends on the policy set by your agency and will set-out in your contract with them. All claimable expenses will be sent to us by your agency for payment to you.
For tax relief for your job expenses (not claimed through your agency) please visit HMRC for clarification by clicking here.
Will I receive a notification of payment?
Of course, you will be sent a text message and email to alert you as soon as a payment is made. Payments are delivered on a daily, weekly, fortnightly or monthly basis, so you always know what to expect, and when.
How long do I have to wait for the bank to clear my funds?
We use the faster payment service which is available for all contractors, this means your wages should reach you on the same day that we pay it in.
When can I sign up for Bupa cover?
Bupa cover is subject to three months employment under our service. This is a policy put in place by Bupa and not Payments Pro so unfortunately there can not be any exceptions. Free cover is subject to fee structure and agency agreements. If you are not entitled to free cover, cover can be arranged at a reduced cost.
Why do I pay the employment costs?
The employment costs are made up of the National Insurance Employers Contribution (NIERS), the Apprenticeship Levy, and the Employers Pension Contribution.
If you was to work in-house under PAYE for the agency or an end client, you would receive a reduced rate so as to account for these costs.
By working through an umbrella, your rate is ‘uplifted’ to account for these costs and most contractors find that their take home wage increases due to this ‘uplift’.
The umbrella cannot pay these employment costs due to the low fee you are charged for the umbrella service. The employment costs are paid by the contractor and accounted for in the uplifted rate the contractor receives from the agency.
What is NIERS?
It’s the National Insurance Employers Contribution.
When a contractor is paid via an Umbrella, the agency is no longer regarded as the employer. This means that they are no longer responsible for paying NIERS. These responsibilities have now been passed over to the Umbrella since they are now regarded as the employer. In order to accommodate this, the National Insurance Employers Contribution is included in the contractors PAYE rate so that the Umbrella can make the correct contribution on the contractors behalf.
For more information on NIERS please click here.
Why do I pay the Apprenticeship Levy?
The Apprenticeship Levy is passed on to the contractor as the payroll figures which the levy is based on, does not fairly represent the scale of the business.
As you can imagine, an umbrella can payroll thousands of contractors every year. In the eyes of HMRC, every contractor is classed as an employee of the umbrella so the scale of the company appears enormous. Obviously this is not a true reflection to the size of the umbrella and the Apprenticeship Levy charge is based on those numbers rather than the actual size of the umbrella.
Most rates given to the contractor are ‘uplifted’ to account for these additional employment costs that the contractor is liable for. Please see the FAQ ‘Why do I pay the employment costs?‘ for more information.
A Contractor’s Guide
In 2012 the UK Government introduced new legislation making it compulsory for employers to provide a workplace pension for their employees. The process started with the country’s largest employers in October 2012 and and has now rolled out to all employers.
This process was to ensure that all employees should have access to a workplace pension scheme. This applies to all employees over 22 years of age and earning over £10,000 a year.
At the moment, the combined minimum is 5% of your qualifying earnings.
Anyone under the age of 75 and living in the UK can and should contribute to a pension. As the state pension will be worth only £110.15 per week, it’s advisable to make additional provision, and a workplace pension may provide the ideal opportunity to do so.
How does this affect contractors working through agencies?
If you work for a recruitment agency the rules still apply. The company that pays you, be it an umbrella or the agency themselves, are required to offer a workplace pension. If you work for more than one agency, each one of them may be required to enrol you, so you could end up contributing to several different pension schemes which is not an ideal situation for many contractors.
If you’re employed by an umbrella company
If you work for an umbrella company such as Payments Pro Umbrella this issue will be negated: you’ll be employed by the umbrella company, not the agency. This means you can work on assignments supplied through different agencies and still only have one employer. The responsibility of offering a workplace pension falls on the umbrella company, so you’ll only have one pension pot. This is one of several ways that working through an umbrella company can simplify a contractor’s finances and make them more efficient.
If you already have a pension
If you already have a scheme that you are happy with you are free to stick with it. However, your employer has a legal obligation to enrol all qualifying employees, so once you meet the criteria they will have to enrol you. Once you have been enrolled you will then have the option to opt out. If done within 30 days you will receive a refund of your first month contributions on month three. In every case you should always make sure you read all the information your employer, or the pension provider, sends you.
To find out more about the Payments Pro pension scheme please click here.
Do I get holiday pay?
Yes, you have the right to 5.6 weeks (28 days) per annum. This is calculated and included in each payslip you receive.
What if I’m unable to work due to sickness?
If you are unable to work for any reason, you must inform the end client and your agency as early as possible. Notification should be made by you (where possible) via telephone. Any absence not previously authorised must be properly explained and in the case of an absence of uncertain duration, you must keep us regularly informed of its expected duration.
If you are absent from work due to sickness or injury that continues for more than five working days (excluding weekends), you must provide us with a medical certificate from your doctor on the sixth day of sickness or injury. Thereafter, medical certificates must be provided to us on a weekly basis.
What about public holidays?
Please be aware that public holidays are counted as part of the statutory 5.6 weeks’ holiday entitlement as described above under the Working Time Regulations 1998 (as amended).
Do I pay your margin/fee when I am not working?
No, our umbrella service is ‘pay as you go’; we will only deduct our margin when we have processed your pay. This is capped at one fee charged per week for any one week period*. This means if you usually get paid on a Wednesday & Friday we will only charge you once. There is no charge for joining or leaving.
*You can not save up timesheets and submit them in one go with the aim of only receiving one fee for multiple weeks work. Your fee will be based on the week worked not when they were submitted.
Why do Agencies have to use Umbrella Payroll Services?
By using a fully compliant company like Payments Pro Umbrella Payroll, the overheads, employment risk and administrative responsibilities are minimised for agencies and passed into us, the Umbrella Payroll company.