You have just been offered an assignment through a Recruitment Agency – Congratulations!
The recruitment agency are now likely to offer you two different rates of pay for the same assignment. One rate, if you decide to be paid PAYE (Pay As You Earn) would mean you are working as an employee of the Recruitment Agency. The second rate, which is a higher rate than the first, is offered if you decided to be paid by an Umbrella Company such as ePayMe or through your own Registered Limited Company.
What option would be best for you as a contractor?
There are many factors to consider when deciding on a payroll solution, just because an hourly rate is higher, it doesn’t necessarily mean that this is the best route to take.
PAYE (Pay As You Earn), which has celebrated it’s 70th anniversary this year, may seem the most favourable route to take, based on the simplicity of its structure. However, this type of payroll needs to be weighed up against the pay increase offered by the Agency, if you choose to be paid through an Umbrella Company. This rate increase for umbrella, along with the opportunity to offset receipted expenses, will show a Tax saving and boost to your take home pay, which is not possible through PAYE.
Umbrella Companies have been in the media over the years, due to the bad practice of a small minority of companies within the industry, leading to a negative reputation shadowing this sector. However, the Government has cracked down on offshore banking and non-compliant companies. Using an umbrella company holds a range of advantages that you can benefit from, when working with a fully compliant payroll company such as ePayMe.
One point that is worth considering when choosing between Umbrella and your own Registered Limited Company, is whether you would be impacted by IR35. IR35 is a legislation that was brought into place in April 2000, to stop contractors claiming they are permanent employees to benefit from Tax advantages. If your circumstances fit with the criteria of IR35, then it is likely that being paid via an Umbrella Company would be more beneficial than running your own Limited Company, dependent on fees. Though running your own Limited Company has advantages, most workers don’t understand the processes and responsibilities involved. When you look into the fees of an Umbrella Company, it can sometimes work out just as cost effective as running your own LTD Company. This is based on an ‘inside IR35’ ground, with the added advantage of less administration for you to manage.
“Choosing the right outsourced payroll company can make a huge difference to your work-life balance.”
The main factor to consider when comparing the two rates of pay offered by the agency, is whether the higher rate of pay, is enough to sufficiently cover the Employers and Employees NI, holiday pay, sick pay and administration fees, which an employer will not have to pay if paid through an Umbrella Company.
As a contractor the best thing is to look around, investigate, ask questions and compare prices, to find the best payroll solution to suit your requirements. At ePayMe we offer a flat rate administration fee on Umbrella payments, which is not based on your salary. Why not give us a call and we will be happy to run a pay calculation with no obligation? We will provide you with information to help you decide on the most beneficial payroll solution.
For more information or to see how ePayMe can help you: Tel: 0800 622 6119 | Email: sales@epayme.co.uk | Website: www.epayme.co.uk