HMRC has published new guidance on working through an umbrella which outlines how the arrangement should operate. It’s no coincidence that this has been issued not long after the off-payroll rules were extended to the private sector because this change has resulted in an increase in numbers of people working through umbrellas. HMRC’s guidance attempts to clarify common aspects of confusion including:
- The money paid to the umbrella is the workers’ gross pay rate PLUS overheads including employers NICs, pension, apprenticeship levy, holiday;
- As well as a payslip, umbrellas usually provide a reconciliation statement which lists all of the above deductions from the amount paid to the umbrella;
- Recruitment agencies should provide their workers with a Key Information Document which outlines all of the above.
The guidance also confirms that umbrella workers are entitled to paid holiday, although it does not outline how people receive their holiday. There are two main mechanisms, rolled up or accrued, and it is important that workers ensure they know which is applicable to them. It is also important for workers to ensure they read their contract terms with the umbrella because there have been some cases where the umbrella has not paid holiday owed to the worker because it was not claimed within a certain deadline. Whilst this practice is not illegal it is certainly not ethical, and we urge all readers to make sure that they do not become a victim to this scam.
You can read HMRC’s guidance here.