More and more umbrella companies are cropping up on every street corner and more and more agencies closing ranks and whittling down their umbrella company lists, it is becoming increasingly harder for umbrella providers to compete it would seem.
One of the biggest problems is educating agencies and individuals in the ways of the umbrella company. The problems seem to have been perpetuated by other umbrella “fly by nights” – those who play fast and loose with expenses, national minimum wage rules and say “contract? Who needs a contract?” – they have left the road to agencies scattered with obstacles. Now it seems some agencies won’t contract with umbrellas at all, while others choose to only contract with one, while others want you to complete a questionnaire that isn’t really suitable.
Educating agencies is crucial and the only way to do that is to knuckle down yourself and get to grips with the legislation and issues yourself – it’s all well and good having specialists you can call on or third party approval but when push comes to shove if you don’t know your stuff you ain’t getting the business!
Agencies need to be told:
Yes we can employ the individuals, we have to have a specifically worded contract of employment, as employees they are entitled to holiday pay, sick pay, maternity pay etc and we do pay it. They can claim expenses but only legitimate expenses, and no we cannot fudge the rules – if it isn’t wholly, exclusively and necessarily in the performance of their services, and they haven’t actually incurred it – they’re not getting it!
No we cannot employ guys if it means we are paying out less than national minimum wage, plus holiday, per hour worked – no we can’t fudge the hours to accommodate.
No we can’t physically pay a “kick-back” – if we do we will be exposing you, the agency, to a managed service company risk because you have potentially made us, the fully compliant umbrella, something other than a provider of services.
No we need to invoice you for services, not for the supply of “joe blogs” because that would imply we are an agency and would have disastrous consequences on you and the guys we are engaging.
Yes we can also engage the individuals on a self-employed basis, you can’t because agency legislation affects how you pay people, but we are not an agency.
We provide services not people, and our service is not “payroll”. We are not a payroll bureau or back office company.
No your contract you have given us to sign is not entirely suitable because it doesn’t contain the necessary fundamentals needed to create a contract for services.
When you are up against another umbrella to get on an agency’s PSL it is very easy to bow down to the agency and agree to everything they want so that you get the business and not your competitor, you can even find yourself agreeing to things you said you would never do.
However, more and more agencies are becoming increasing knowledgeable in the world of umbrellas and are becoming less and less susceptible to sales patter – I have found that providing you know why you must operate in a certain way, and are able to explain this to the agency then they are more likely to sign up with you than “dodgy umbrella services” who are giving a big fat kickback and will agree to anything. If we all took this stance with agencies, and educated ourselves, we may find we are all on a more even playing field!
About the author: David Harmer
David left Accountax as Operations Director in December 2010 where he regularly defended clients against HMRC attack up to and including tax tribunal level. He was a much sought after umbrella specialist and in January 2011 he set up Marble??, an umbrella company providing a 100% compliant service to contractors.
David Harmer. Director, Marble Commercial Contracting
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