It can be hard to juggle everything as an agency worker. You’re usually concentrating on doing your current role, and/or also keeping an eye out for your next role.
So the question of your employment status doesn’t always have an obvious answer. In short, it depends on the arrangements you have in place with the agency and the end-client.
It’s perhaps easiest to first of all consider who pays you, and the tax status of your income.
My agency pays me
If your agency pays you via their payroll (i.e. your money is taxed through PAYE) then you are likely to be an agency worker, and your employment status will be “worker”. This means that you will have certain statutory rights and benefits as a “worker”, plus you have some additional protections as an “agency worker” under the Agency Workers Regulations.
It’s important to be aware that it is possible to be paid via payroll and also be self-employed if your end-client deems you to be “inside IR35”. We are referring to off-payroll legislation which came in to the public sector in 2017, and are planned to affect the private sector from April 2021. In this instance, your income will be taxed as if you are an employee, but your employment status will be self-employed, meaning that you will have no statutory rights or benefits. You will probably already be aware if this affects you before you start your assignment. You can read more about these changes here.
If your agency pays you gross, i.e. without any tax being deducted through PAYE, then you are likely to be self-employed.
This means that you will need to ensure that you declare your income to HMRC at the end of the tax year and ensure you pay any tax owed.
As a self-employed person you will either be working as a sole trader or partnership, or via an incorporated limited company. We have written a guide to help you decide which is more suitable for you.
Being employed by an umbrella company
If you sign up to an umbrella company they should employ you, meaning that you will receive all statutory rights and benefits that any other permanent employee receives.
This means that if you are paid by an umbrella company then you are likely to be an employee, meaning that you have all 84 statutory rights and benefits of employment. As an employee you should be paid via payroll with PAYE deducted, employees NICs deducted and employers NICs paid to HMRC.
However, not all umbrellas do actually employ their workers, so you should check your contract with them to be certain.
If you aren’t employed by your umbrella but your income is taxed via payroll then your employment status is likely to be “worker” which gives you fewer statutory rights and benefits.
Click here to find out more about umbrella.
