With IR35, Brexit and Covid-19 kickstarting large-scale change, business leaders and their workforces are facing a number of challenges that require honesty, open communication and transparent ways of working to drive business success.
Our payroll and contractor management experts reveal the importance of transparency in your umbrella provider – and how to choose the right umbrella for your business.
5 Reasons to Choose a Transparent Umbrella Company
1. Ensuring Contractors and Businesses Understand Pay and Obligations
Whilst any supplier that does not prioritise clear, consistent communication is bound to cause problems for their customer, those that are especially close to finance and compliance could cause major issues if the wrong information is delivered, recorded or processed. Transparent umbrellas will regularly provide the following for each worker:
- Payslips in real-time
- Full breakdown of disbursement
- Full breakdown of pay calculation, including an explanation of how gross pay is calculated
- Employer-side deductions including tax and national insurance.
If a contractor does not receive timely and accurate financial information, they cannot rigorously check that all payments are correct, which may raise unnecessary disputes and create additional admin on behalf of recruitment agencies and their end clients.
Truly transparent umbrella agencies will provide all workers and their employers with tailored pay information, created uniquely for each individual, before contracts are signed. The best umbrella agencies make sure that costs are clearly laid out to help businesses and their contractors understand their own situation and obligations, to facilitate a positive start to the assignment experience for both worker and end client.
2. Reduced Risk
The advent of new IR35 reforms to off-payroll rules will see major changes to the determination of employment status under British law. As tens of thousands of contractors – a large percentage of the UK’s total contractor workforce – are predicted to fall under the ‘outside IR35’ category, the implications of the updated legislation will significantly change ways of working between contractors, their recruiters and their end client businesses.
Companies found to be non-compliant with IR35 rules could be required to pay a penalty of between 40% and 70% of unpaid tax. Wrongly classifying workers as outside IR35 could result in large tax bills that cripple individual contractors. Wrongly classifying workers as inside IR35 could prove a deterrent for temporary workers, who may decline to apply for assignments or leave placements early due to fears over losing income, and through the confusion see businesses decline projects they would normally feel confident to deliver. Brexit’s changes to freedom of movement and immigration laws will see contractors make further demands of umbrella providers. Many offshore workers and those on international placements will likely be confused, frustrated and overwhelmed at the sudden changes in legislation and lack of clarity in some areas – umbrellas will need to provide a core level of support to contract workers who are navigating new waters.
Honest, regular communication between umbrellas, recruitment consultancies and businesses is the key to effective collaboration and efficient administrative procedures across all parties.
3. Contractor Recruitment & Retention
Compliant and transparent umbrella companies are vital to establishing and maintaining long-term relationships between businesses and contractors. Poor quality contractor management suppliers may deliver late or inaccurate payment or provide incorrect information and advice to temporary workers. Frustrated contractors will be far more likely to leave an assignment early and decline to take up a further placement in the future.
Contract workers with negative payroll experiences will often associate this experience with the end client, regardless of fault, and will dissuade colleagues in their networks from partnering with the end client. Transparent umbrella agencies can make all the difference to company referrals and temporary workforce retention rates.
4. Efficiencies
Inefficient payroll and contractor management suppliers can cause more work and stress than keeping these services in-house. However, a payroll provider that operates clear processes and does everything in its power to support every contractor will make onboarding and payment fast and seamless.
Transparent processes and communication are pivotal in empowering contractors to submit their own timesheets and expenses properly and on time, in a way that enables the payroll provider to deliver timely services to both contractors and the end client. The best umbrella companies are easy to work with and require very little (if any) administrative work from the end client.
5. Help in Emergencies – Support When You Need it Most
Emergencies such as the Covid-19 pandemic serve to highlight the vital place of an umbrella company in the lives of contractors and the country’s economy. Contractors in the public sector and in key services bore the brunt of 2020’s economic downturn:
- At the height of the pandemic, 25% of the UK’s teachers had been furloughed or lost work contracts. As contractors, supply teachers were badly impacted: over 80% of all supply teachers were unemployed in Q2 2020 due to the furlough scheme or assignment cancellations.
- Temporary and cover staff working in Health and Social Care were often forced to choose between their safety and their jobs after different interpretations around furlough, workplace rights and the withholding of wages, with some shielding or ill individuals forced to attend work.
- Engineers and IT contractors were wrongly informed that they were ineligible for furlough pay and hundreds were denied payment for several weeks.
Over 60,000 contractors were affected by misinterpretation of the Government’s Coronavirus Job Retention Scheme (CJRS) in the spring of 2020 alone. Many umbrella agencies, alongside Government departments, dispensed inaccurate advice and wrongly interpreted the furlough rules. Thousands of contractors received shockingly low take-home pay and saw their short-term placements and career prospects damaged due to the errors.
Transparent umbrella companies are important partners during times of crisis and difficult situations. Generate’s expert payroll team have always been at the forefront of worker protection. In spring 2020, we proudly fought for the rights of our contractors and we were one of the first umbrella companies in the UK to secure maximum salary payments for contractors under the furlough scheme. As a transparent provider, we communicated openly and regularly with our contractors, ensured every furloughed individual received the correct funds by backdating payments, and provided every eligible contractor with the support they needed.
Find the Best Umbrella Company to Work With
The best umbrella companies will always be there to support you. At Generate our experienced payroll specialists support over 6,000 contractors – find out how we could help you.
