[Closed] Umbrella company and agency scam- what can I do?

What are the deductions?

A lot of agency's use umbrella companies. A lot of the lads I have working for me claim travel and holiday which boosts their initial rate at the end of each period of work.

Usually the 'employer' pays the umbrella a gross figure then the umbrella pays employers NI etc which is why the wage went up from 10 to 10.50.

The umbrella charges a fee though, but that should be analogous to the company paying a payroll company, draw up employment contracts etc. So should be reflected in the wages the company pays (the extra 50p).

All this is really a bit of a dodge to get around employment law and usually used by companies employing consultants for short term work (I.e. well paid) not minimum wage I'd have thought. Its a simplified way of being a self employed contractor as a ltd company without all the tax minimising benefits (although some ask you to submit your expenses via them so some of that lost £1 could be reclaimed by paying yourself with milage claims, lunch, etc).

So really your options are to consider whether the job is really a minimum wage job and is £9 enough of an uplift to justify giving up any rights?

I'd get out of there before someone steals the T-virus.

As pointed out, that's how it works.  The agency will always take a margin in your hourly rate (that's how they make money). They put you through an umbrella so you are not employed by the agency and are classed as a temporary worker. There will be a charge to you for the use of the umbrella  company.

Your boss should be aware of this. If wants you to have more money, he needs to renegotiate the rate with the agency.

You probably won't be able to claim mix in the way of expenses anymore, the rules have changed. Check with the umbrella.

What do you have in writing? Most jobs are advertised at a limited company /umbrella rate but 10 limited is below min wage if you are over 21. That is a gross rate and you need to take off employers ni, holiday pay then employee ni and income tax before you get cash in hand.

Ask the agency what their margin is. If they say they wont tell you ask the guy you are reporting to the total charge. At that level any more than £3 margin is taking the piss.

Umbrella is still paye you can claim tax back on some expenses but after the home to work expenses changed not really worthwhile.

Agency should be able to pay you paye with no costs to you.

I'm pretty sure the agency's margin is well above £3hr, judging from what employers used to pay to agencies.

I looked at some umbrella co faqs, and it seems the main thing is that, if you work for an employer, it has to pay this NI to HMRC, whereas with an umbrella, the employee has to pay it, which is about £50week. That is on top of the normal tax and NI contributions.

There are other deductions, like pension, margin, etc which add up to less than £20week, but that doesnt worry me, as its mostly the way they take their fee,

So it seems that there is a wage percentage increase (maybe 13.5%), which the umbrella co has to offer to make it worthwhile

Minimum wage is gross before deductions.  £9 or £10 an hour is well over minimum wage

I have this in writing, at least,

'XXXco may have mentioned a pay rate of £10.50 an hour but by paying you through the third party we can increase it to £11 per hour, and Quest only charge £10 per week'

I feel it is time to begin legal proceedings but dont know where to start

Im not prepared to work there for£9

I am paying £30+ a week in diesel to get there to start with.This may be tax deductable, but that will only add £6week

https://www.thesalarycalculator.co.uk/hourly.php

£11 per hour, 37.5 hr a week.

Takes home after tax & NI £345 a week.

take off the £10 a week for the umbrella as mentioned above

£335 a week

net rate of £8.93 p/hr

you know you have to pay tax and NI?

‘XXXco may have mentioned a pay rate of £10.50 an hour but by paying you through the third party we can increase it to £11 per hour, and Quest only charge £10 per week’

Well there is your answer.  The agency are paying you a higher headline rate of £11 by going through an umbrella.  You pay £10 a week to use Quest (the umbrella).  Through an umbrella you will have to cover Employers and Employee's NI contributions, so there is that.

If you go PAYE then the agency will reduce the rate to cover the costs of payroll and NI.  I suspect your take home will probably be better as it is.

Edit: what was the role advertised at, or what did you agree when you accepted?

legal action will take many hundreds of pounds and be unlikely to do anything as it appears you just have a misunderstanding about net and gross wages

There is no legal argument here at all.

I calculate £10.50 hr X50hrs = 525

, less 20% tax 425, less 12% nI = £363

Does that sound right?

Whereas through umbrella;

A)Total Income   511

less

C)Employer NI paid to HMRC 87.70

D) Margin 10.00

E)Apprentice Levy :2.56

F) Employer Pension Deduction  6.73

= Total PaymentsI) 452.17

less

NI Contribution  34.82

Pension Contribution 8.08

Tax Deducted  44.80

= Paid to Employee 364.47

Does that sound right?

If I enter 511 in gov.uk tax and ni calculators i get 48 and 56 to leave take home pay of £407

so whats wrong? I dont seem to be able to add up these days

Sounds like one of two things

1) you didn't understand how being paid via umbrella works (employers NI)

2) someone at the agency didn't understand/explain it very well.

Did the agency actually advertise the role as £10/hr, or did they just tell you that's what it would be via an umbrella? Because the gist of it sounds like you didn't understand that you would be paying tax on it?

[Edit] 20% tax is on income over the tax free allowance, you should be paying barely any income tax. Unless this is a second job.

Does that sound right?

Yes.

not a spoon-

agency advertised at £10-12, employer agreed to £10.50

Umbrella co came in after all that.

Employer definitely wants me /us to be paid at £10.50, without umbrella

And you are being paid that GROSS.    thus £9 an hour NET

Have you accounted for the tax free allowance? You should be getting the first ~£1000/month tax free.  Have you given them your p45 from your last job, are you on an emergency tax code maybe?

The umbrella has to give you a pay slip detailing your wages and any deductions on or before payday.  I've no idea if they legally have to show you the employers side if it as well, but it would seem logical as you already know it and are the one paying their fee.

@ jeckkyl , 😀 😀 😀

whats this about first £1000 month taxfree?

You get £11850 tax free allowance, 20% on earnings between that and 45k, 40% on earnings over that.

So the first ~£225 per week you pay no tax on.

If you haven't given them a p45 you may still be on an emergency tax rate which you'll need to sort out with the agency/umbrella.

oh i see

according to that salary calculator I should get £404week net, so I am £34 short.

Thats from a basic £10.50, no umbrella company.

So they have not got me a better deal.

Surely, that was the contract?

So they have broken the contract...isn't the law on my side?

You said earlier the options were minimum wage via the agency or £10.50 via umbrella?

Do you actually have your payslip showing how much tax you've paid?

This calculator puts you at £422 (based on 50hr week and 52 week year) h<span style="font-size: 0.8rem;">ttps://listentotaxman.com</span>

Realistically you're only going to be able to sort this out with the agency and the umbrella. Bear in mind that you should also be able to claim un taken holiday pay etc at the end of the job which will up the effective hourly rate too. It does sound a lot more like you don't know what you have to pay out off your gross pay, so its impossible to say if someone's underpaying you or not.

No solicitor is going to take it as a case as it would take you months to pay them to even write a letter for an extra 50p/hr.

there is a payslip above, under 'Whereas through umbrella;' tax was 44..80 that week

Before this job, have you worked since April? If this is the first job in this tax year, the fact that you're paying tax at all on your first payslip suggests you are not on the right tax code/tax has not been calculated correctly. I think you need to establish whether this is correct first before anything else.

pretty sure the tax  is correct, they have my taxcode etc etc

Did you give them the P45 from your last job?

no, I'm still waiting for my P45,and was doing this job fo 2weeks before I told the previous company that I'd left.

Plus they had 'lost' my new address. I never thought Asda would be so utterly useless until I started working for them

But noone will take you on without an NI number

An NI number does not guarantee you are on the correct code. Hell you won't find out if it is unique until you start drawing a pension (google will show you the probably 1 or two cases so far)

To me there seems to be some confusion

You have a contract with the agency which is for 10.50ph if you use their umbrella or minimum wage (up to 7.83ph depending on age) if you go as PAYE. These are the two options that they have on the table. so a 10ph PAYE comparison to 10.50 umbrella is not valid.

The person your agency is renting you out to may want you to earn 10.50. In which case they may need to pay more to the agency or take you on themselves (after paying agency fees etc.). When I last did agency work they took an even split on the money which really did sting but they could get me as many hours as I wanted a week so swings and roundabouts. Working for an agency is normally bad for the person paying and the person doing the work and good for the agency they are in this for cash not fun...

From reading all the posts if you are 34 short it is unlikely to be a tax code but some other deduction - probably for sick time, holiday, pension but without seeing the contracts and the payslips it is hard to really say.

You could go to CAB and see if they will review it for you (or when TJ comes along he can provide a potential alternative) but unless you have money to burn you can either suck it up or find a new job.

The confusion is that the agency and employer committed to £10.50hr, without an umbrella co.

Then the agency came up with the umbrella at £11

But when I told the agency that the umbrella co worked out at less than what £10.50 would have, and that therefore I was not prepared to go throught he umbrella the Agency then backed out of the £10.50 agreed and offered minimum wage

I am afraid tax calculations are not really something I know about

without a p45 you will almost certainly be on emergency tax so will be taxed on every penny you earn - your tax allowance being used for yor  previous job which as far as the taxman knows you are still doing.

Agency working and umbrella companies are scams to avoid tax and to avoid you getting your emplyment rights usually

You need to get your p45 to them, you need a tax code, you need a proper payslip with the details of how and why you have been paid ( a legal entitlement)

Tj other than CAB any other options for free good advice?

you are the resident expert 😀 on employment stuff

I used to use an umbrella company 'cos EasyJet didn't want proper employees at the time. The accountant took 1% of my pay to do this. 10%+ is taking the piss.

10%+ is taking the piss.

Where do you get 10% from?

OP, it's what cornholio says.  Your time is better spent making sure you are on the correct tax code, and you are claiming any expenses due to you.

You have a contract with the agency which is for 10.50ph if you use their umbrella or minimum wage (up to 7.83ph depending on age) if you go as PAYE. These are the two options that they have on the table. so a 10ph PAYE comparison to 10.50 umbrella is not valid.

The person your agency is renting you out to may want you to earn 10.50. In which case they may need to pay more to the agency or take you on themselves (after paying agency fees etc.).

YOu might have a council advice shop or law centre in your area

However its not reached that point yet.  Your current employer will not have the right tax code for you if you have not given them a p45 and you need to see a payslip to see what deductions have been made.  Once you have the right info then you can find out what is happening

you need to see a payslip to see what deductions have been made

He's got one.  It's posted above.

Agency Scum here, hi. There are 2 different but related issues here IMO, the amount of take home from the umbrella and the pay negotiation with the agency.

Deal with the umbrella issue first, call the up and tell them you’re confused as to what you’re taking Home as you thought it should me more. They will explain the numbers and you will then be in a better place to work out if you’re being screwed by the agency or not. Tax code is a possibility as is some deductions like holiday pay that you’ve not taken into account. Either way, have a chat.

Next up, the agency. They save money by you going umbrella as they don’t have to pay employees NI amoungst other things so it’s logical you get more gross pay with an umbrella than PAYE. Ask for the options again and get them in writing, take than info and input it into a salary calculator and see where you are. Then inform the agency of your preferred pay option. The agency makes money by charging the client more than they pay you, if the client wants you to have it all they either need you to go direct or to pay the agency more. How much the agency take varies but it’ll be a minimum of £1 per hour + costs (NI, etc) and likely more than that. I’ll debate how reasonable that is on another thread if you so desire!

Finally, you have the option to tell them to stick it as it’s a contract and you’ll have at longest a 1 week notice period. DM me if you want more info, I’m no lawyer but I’ve been in recruitment for a long time and may be able to help.

The agency never mentioned an 'umbrella' company as such.(until much later)

It seems that - umbrella companies make you work 'as a contractor', rather than PAYE

Contractors must pay NI to HMRC,(employers NI contributions) as well as their own.

This costs 13.8%, so unless the Umbrella co offers an increase of over 13.8% it is not worth it.

After filling in the PAYE form on their site, Quest(umbrella) asked me to fill in the Contractor's form. Nothing else was said

Nothing that the Agency has told me referred to any specific payments other than Tax and NI, nor that I would not be on PAYE