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alexp78
27th June 2011, 13:52
It is occasionally mentioned that umbrellas are beneficial for someone who only expects to work irregularly, or "part-time", on IT contracts.

With a Ltd Co, accountancy costs continue without regard to contracts awarded. But what is the situation for someone who has signed a contract of employment with an umbrella? Will charges continue during out-of-contract periods?

Also, it seems the ARW Swedish Derogation Model will be totally inappropriate as salary payment is required to continue, presumably funded by the other working contractors.

:frown

Steven@Parasol
28th June 2011, 14:24
It is occasionally mentioned that umbrellas are beneficial for someone who only expects to work irregularly, or "part-time", on IT contracts.

With a Ltd Co, accountancy costs continue without regard to contracts awarded. But what is the situation for someone who has signed a contract of employment with an umbrella? Will charges continue during out-of-contract periods?

Also, it seems the ARW Swedish Derogation Model will be totally inappropriate as salary payment is required to continue, presumably funded by the other working contractors.

:frown

Hi there

I can only speak from our point of view but I know some of the other leading umbrellas share the same view.

We charge contractors on a time sheet basis. If you don't submit a timesheet they you won't be charged and this will still be same after the introduction of the AWR on 1st ocotber.

With regards to the pay between assignments, we will be implementing a model based on the swedish derogation and this is a decision we have made based on a risk analysis of our existing customer base.

We currently have around 9,000 contractors working via our umbrella and have done so for the last decade. Our analysis suggests that the majority of these contractors go from one contract to another with a maximum of three weeks on the bench. based on this, we believe we can afford to offer the swedish derogation model.

our fee will be going up by a small amount (pence not pounds) to cover the extra admin etc.

one analogy I've used to describe it is that is is similar to the insurance industry. The premiums of the many pay for the claims of the few.


As a result of the AWR, in addition to paying contractors in between assignments we will also have to help you find your next role as well.

LisaContractorUmbrella
28th June 2011, 14:54
Hi there

Under the Swedish Derogation payment is due for periods between assignments. however, even if you only work part time or odd hours you will still be working under a single assignment rather than being 'between jobs' so to speak.

alexp78
28th June 2011, 14:57
OK.

But what if it is the intention of the contractor NOT to work full-time.

Maybe a four month stretch off, or even working just a few isolated weeks a year. i.e. to have total flexibility without obligation. It sounds as if the Swedish model, and the future umbrella model, is to expect the "employee" to work continuously.

alexp78
29th June 2011, 07:45
Hi there

Under the Swedish Derogation payment is due for periods between assignments. however, even if you only work part time or odd hours you will still be working under a single assignment rather than being 'between jobs' so to speak.

For the avoidance of doubt about the meaning of this, if I were to join your umbrella company with the intention of working 1 week every month, would you pay me continuously? What would the payment be for the periods not working?

Assume that a client offer is ready, and that I would not want to work, or be expected to look for work, in the intervening periods.

I am trying to get clarity on what can be real situations. It has to clear all round what the obligations are before signing up.

Thanks.

LisaContractorUmbrella
29th June 2011, 07:51
For the avoidance of doubt about the meaning of this, if I were to join your umbrella company with the intention of working 1 week every month, would you pay me continuously? What would the payment be for the periods not working?

Assume that a client offer is ready, and that I would not want to work, or be expected to look for work, in the intervening periods.

I am trying to get clarity on what can be real situations. It has to clear all round what the obligations are before signing up.

Thanks.

To be honest, if your contract was direct with a number of clients and you were picking and choosing when to work for them on a very part time basis you would be better to work as a sole trader; in your circumstances, if I have understood you correctly, umbrella would not be the way to go.

alexp78
29th June 2011, 10:06
It is near impossible to work as sole trader in IT. It was effectively banned along time ago.

Limited company looks over the top if work is not continuous, especially the extra administration.

Umbrella initially looks appropriate. One option might be to simply join and leave for each assignment - albeit this would generate a lot of P45s.

But you haven't answered whether the umbrella would pay continuously under the Swedish model? Would an umbrella mandate continuous working, and force someone to unwillingly accept an assignment? What else would the umbrella do to an "employee" who is by choice "part-time"? Why would umbrella not be the way to go?

LisaContractorUmbrella
29th June 2011, 10:50
It is near impossible to work as sole trader in IT. It was effectively banned along time ago.

Limited company looks over the top if work is not continuous, especially the extra administration.

Umbrella initially looks appropriate. One option might be to simply join and leave for each assignment - albeit this would generate a lot of P45s.

But you haven't answered whether the umbrella would pay continuously under the Swedish model? Would an umbrella mandate continuous working, and force someone to unwillingly accept an assignment? What else would the umbrella do to an "employee" who is by choice "part-time"? Why would umbrella not be the way to go?

If you are not working through a recruitment agency but are contracting direct with the client then there is no reason why you cannot act as a sole trader. A limited company would be an option but it would depend on the level of work that you are talking about and, really, the same things applies with an umbrella company - would you be working a couple of hours a day or would it be a couple of days once every few months and would it all be for the same client????? If the work was all for the same client it would be a single assignment and therefore there would be no obligation for continuous payment as, even though the work would be sporadic, you would not be between assignments. If it was the case that you worked for 2 or 3 days for different clients a couple of times a year then your employment would cease at then end of each assignment; the umbrella company is your employer and is obliged to source work and you would be obliged to accept it or tender your resignation.

Hope this makes things a bit clearer for you :smile

alexp78
29th June 2011, 11:45
Yes that's much clearer.

The pertinent point is that a new employment would start for each new contract lasting weeks/months after any unspecified break, and then probably cease for the next break. And variations on this for work that may be only days, and/or fragmented over some other period.

So presumably there is no ongoing cost in between contracts, assuming no tie-in period or starting/leaving charge.

:D

One additional question of fine detail for this scenario: as each employment is potentially for one client, are tax-deductable expenses (travel, accommodation) still allowable by hmrc?

:confused:

Thanks.

LisaContractorUmbrella
29th June 2011, 12:19
Nope under these circumstances you would not be able to claim expenses as, from the offset, your intention would be to have only one assignment during the course of the employment - your workplace would then automatically be considered by HMR&C to be permanent.

Good questions - you've obviously done your research :yay:

alexp78
30th June 2011, 07:55
:wave:

Coming round full circle again: a thought on the Swedish Derogation Model, with reference to irregular contracts:

In between contracts, a worker can

1. Leave employment. Save paying any fees until next time. But not be allowed tax relief on expenses.

OR...

2. Stay employed. Continue paying fees. Claim tax relief on expenses. Claim 4 weeks pay while not working. :eek :eek :eek

I still don't understand who is going to pay for the SDM commitment?

I guess I'll have to join an umbrella to find out. To be honest, option 2 sounds better.

LisaContractorUmbrella
1st July 2011, 14:52
But you also have to remember that under to SDM the employer has a responsibility to source work for the individual, which is why relationships between umbrellas and recruiters will be strengthened, and as there has to be mutuality of obligation within the employment contract you cannot reasonably refuse the work offered; if you did not want to take the assignment offered you would be obliged to resign.

alexp78
4th July 2011, 08:37
That makes it more like working for a software house but without any of the benefits of real "employment".

In other words, the umbrella will have influence or control over what work is carried out. The employee is no longer a true freelancer, determing his (or her) own destiny. But if working for a software house, real employment benefits are actually provided, such as sick pay, holidays, all expenses reimbursed, training, etc.

And the definition of "protection" proposed by the AWD/SDM is questionable, if the umbrella has the right of immediate dismissal of an employment contract. Will umbrella employees be able to take Legal Action for unfair dismissal?

Further, if the employee leaves employment (or is forced out) in between assignments, then no expenses can be tax-deductible, which possibly makes any offer involving staying away from home not viable in the first place.

LisaContractorUmbrella
4th July 2011, 09:09
That makes it more like working for a software house but without any of the benefits of real "employment".

In other words, the umbrella will have influence or control over what work is carried out. The employee is no longer a true freelancer, determing his (or her) own destiny. But if working for a software house, real employment benefits are actually provided, such as sick pay, holidays, all expenses reimbursed, training, etc. The contractor is at liberty to pick and chose his own assignments; the umbrella company will assist in finding new employment if the contractor doesn't have a new assignment in place towards the end of the old one. However, the contractor does not have to take the assignment; if he wanted a 6 month break or something he would simply hand in his notice.

And the definition of "protection" proposed by the AWD/SDM is questionable, if the umbrella has the right of immediate dismissal of an employment contract. Will umbrella employees be able to take Legal Action for unfair dismissal? The umbrella doesn't have the right of immediate dismissal other than in cases of gross misconduct or gross negligence but would still have to follow disciplinary procedures

Further, if the employee leaves employment (or is forced out) in between assignments, then no expenses can be tax-deductible, which possibly makes any offer involving staying away from home not viable in the first place. If you were not working under assignment what business related expenses could you possibly claim????

alexp78
4th July 2011, 12:06
-------------------
QUOTED:

That makes it more like working for a software house but without any of the benefits of real "employment".

In other words, the umbrella will have influence or control over what work is carried out. The employee is no longer a true freelancer, determing his (or her) own destiny. But if working for a software house, real employment benefits are actually provided, such as sick pay, holidays, all expenses reimbursed, training, etc. The contractor is at liberty to pick and chose his own assignments; the umbrella company will assist in finding new employment if the contractor doesn't have a new assignment in place towards the end of the old one. However, the contractor does not have to take the assignment; if he wanted a 6 month break or something he would simply hand in his notice. Or choose to stay on to claim 4 weeks payments under AWD/SDM.

--
And the definition of "protection" proposed by the AWD/SDM is questionable, if the umbrella has the right of immediate dismissal of an employment contract. Will umbrella employees be able to take Legal Action for unfair dismissal? The umbrella doesn't have the right of immediate dismissal other than in cases of gross misconduct or gross negligence but would still have to follow disciplinary procedures. So staying on for 4 weeks payment cannot be challenged?

--
Further, if the employee leaves employment (or is forced out) in between assignments, then no expenses can be tax-deductible, which possibly makes any offer involving staying away from home not viable in the first place. If you were not working under assignment what business related expenses could you possibly claim???? As discussed earlier in the thread, leaving employment after each assignment would mean that no expenses are tax deductible for the assignments whilst in employment.

--------------------

I apologise if the points I made are not clear. I hope this clarifies.

The subject of this thread is how umbrellas would cater for irregular contracting where this is what is required.

Leaving after each assignment makes expenses non-tax-deductible, which could be the deciding factor for taking on an assignment in the first place, especially if travelling and alternative accommodation is required. The freelancer may have to stay employed to qualify for the "overarching" employment contract quoted in other forum threads. This would be to make irregular contracting through an umbrella viable, or at least tax-efficient.

Staying on after each assignment to make expenses tax-deductible also means that under the AWD/SDM, the umbrella will have to make 4 weeks payments every time, or "get rid of" the employee somehow.

The questions (a) who pays for the 4 weeks, or (b) how the employee is removed unwillingly have not been answered. Helping find work is not a valid answer, as, again, the point of this thread is about irregular contracting where this is what the freelancer wants, or is constrained to.

As umbrellas have voiced enthusiasm for AWD/SDM, perhaps someone had better clarify what will happen for this scenario.

LisaContractorUmbrella
4th July 2011, 12:12
As you are enquiry about irregular contracts can you confirm whether or not you are in permanent employment and just wanting to do the contracts on the side so to speak?

alexp78
5th July 2011, 08:39
The issue should be addressed regardless of the person's situation.

Someone in full (or part-time) real employment in IT may well have problems doing similar work elsewhere in the first place as employment contracts usually stipulate that any significant work or inventions would be the property of the employer.

If the person had other paid work of any nature, then claiming additional AWD/SWD payment is clearly going to be questionable anyway.

It would be easiest to assume that the person does not have any other gainful employment. Perhaps he/she cannot due to another commitment such as looking after an elderly relative. Perhaps he/she chooses not to work to pursue another interest or hobby - fishing, brewing (not commercially), competing in local sports teams (not sponsored or for reward), contributing as an amateur film critic (no payment), or just doing nothing...or perhaps the person has an injury or condition or disability meaning they can only work occasionally despite wanting to be full-time.

I do not think it relevant to spell out my own situation except to say that I do not have any sinister motives.

The question is to find out whether an umbrella is appropriate for freelance work which is irregular. This is more indicative of true freelance occupations than working 52 weeks per year. In the acting profession they call it "resting" in between jobs. The latest beaurocracy now considers that an IT worker has to be protected against the possibility of "resting".

Back to the question. Being employed only for assignments means expenses are not tax-deductible: if staying away from home this is not viable at todays' rates, driven down by outsourcing. But staying employed continuously looks even better because, as well as tax-deductible expenses, there is the extra 4 weeks payment at the end of each assignment. But who is going to fund this?

LisaContractorUmbrella
5th July 2011, 12:19
The issue should be addressed regardless of the person's situation.

Someone in full (or part-time) real employment in IT may well have problems doing similar work elsewhere in the first place as employment contracts usually stipulate that any significant work or inventions would be the property of the employer.

If the person had other paid work of any nature, then claiming additional AWD/SWD payment is clearly going to be questionable anyway.

It would be easiest to assume that the person does not have any other gainful employment. Perhaps he/she cannot due to another commitment such as looking after an elderly relative. Perhaps he/she chooses not to work to pursue another interest or hobby - fishing, brewing (not commercially), competing in local sports teams (not sponsored or for reward), contributing as an amateur film critic (no payment), or just doing nothing...or perhaps the person has an injury or condition or disability meaning they can only work occasionally despite wanting to be full-time.

I do not think it relevant to spell out my own situation except to say that I do not have any sinister motives.

The question is to find out whether an umbrella is appropriate for freelance work which is irregular. This is more indicative of true freelance occupations than working 52 weeks per year. In the acting profession they call it "resting" in between jobs. The latest beaurocracy now considers that an IT worker has to be protected against the possibility of "resting".

Back to the question. Being employed only for assignments means expenses are not tax-deductible: if staying away from home this is not viable at todays' rates, driven down by outsourcing. But staying employed continuously looks even better because, as well as tax-deductible expenses, there is the extra 4 weeks payment at the end of each assignment. But who is going to fund this?

But, as I have tried to explain, it wouldn't work like that. The overarching employment contract that umbrella companies operate is based on continuity of employment as with any other employer. It is expected that employees will work full time (other than for holidays, sickness, maternity etc) - you wouldn't expect any other employer to pay a year's salary to someone for them then to only work for 3 months of the year when they had been taken on under a permanent contract surely?

alexp78
6th July 2011, 09:48
So, the conclusion for this thread is that umbrellas are not intended for a freelancer working on an irregular or part-time basis. It looks like the employee is expected to arrange his/her own continuous work less certain traditional absences such as holiday, maternity, etc. Who sets the allowances? e.g. 4 weeks holiday in the first year, adding a day or two for long service, and so on?

The intention is for full-time employment, but, save the "out of work" pay (AWD/SDM), there are none of the other benefits of proper full-time employment (training, pension, travel and accommodation arranged and fully paid for...).

The issue of how to deal (legally) with an "employee" who might not arrange their own continuous work, or accept work arranged by the umbrella, has not been addressed.

Someone who might only join an umbrella separately for each assignment they win will end up having tax relief on expenses disallowed, making an umbrella less attractive or not viable. This is a contradictory situation as irregular work is more indicative of a person truly independent.

Perhaps someone else can make a comparison of "umbrella employee" versus "agency employee". For example nurses who choose to work irregular part-time hours do so through an agency, as this freedom of availability is possibly the main factor.

LisaContractorUmbrella
6th July 2011, 10:44
[QUOTE=alexp78;1356019 "So, the conclusion for this thread is that umbrellas are not intended for a freelancer working on an irregular or part-time basis"

No an umbrella company is not always the best option for someone working very irregular assignments - that is what I said in the first place :facepalm: