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Misunderstanding Umbrella Company Pay Rates: How Recruiters Can Protect Themselves

Umbrella Company

Umbrella company employment has important advantages for you as a recruiter and your contractors, but it’s vital to make sure everyone understands what’s happening. The rate paid to the umbrella includes their margin and costs, as well as the contractor’s pay. Occasionally, contractors misinterpret this, believing the uplifted rate is the amount that will be paid to them.

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This could leave you managing disappointed and upset contractors, and it may not stop there. Such misunderstandings have led workers to bring tribunal claims for unlawful deductions, believing for example that employer’s national insurance was being deducted from their pay.

This situation can be easily avoided, by ensuring they have the right information early on in the recruitment process. This will ensure their expectations are met and keep them happy, and it will also stop you having to deal with unnecessary complaints.

Setting the right expectations

Once your contractors have been given a number as “their pay rate” it will often be difficult to change this expectation. For this reason, it’s very important that they get a clear and correct explanation of umbrella pay right at the start. It’s often up to the recruiter to deliver this explanation, as it comes up when you first discuss how the contractor will be paid.

In particular, the contractor should be aware that the rate paid to the umbrella company includes their pay and the umbrella’s margin and costs. Contact Orange Genie if you need to arrange staff training around umbrella company pay.

Key Information Documents (KIDs)

To combat concerns that some agency workers were not aware of the details of their engagement, each worker must now receive a Key Information Document before they accept an assignment. This is true whether or not they will be employed by an umbrella company. The KID must provide details of the engagement, including:

· The minimum rate of pay the contractor can expect

· How they are to be paid

· If they are paid through an intermediary (e.g. an umbrella company)

· Any deductions or fees that will be taken

· An estimate of their take home pay or an example pay calculation

Where KIDs are provided to all contractors, misunderstandings about the pay rate become much less likely. The provision of KIDs has been a legal requirement since April 2020, and it’s never been more important to ensure compliance.

Compliant umbrella companies have been providing this information to prospective employees for a long time already – the law just requires that they receive the information earlier, from you. If you haven’t yet implemented your KID process, Orange Genie will be able to help.

Support from the umbrella company

A close partnership with the right umbrella company could go a long way to resolving this issue for you and your contractors. As well as training your staff and helping you produce KIDs where necessary, a good umbrella will have a robust on-boarding process which will head off most potential issues.

For example, Once Orange Genie are in contact with your contractors, our expert team will be able to clearly answer any questions they might have. We’ll also supply them with an accurate pay illustration so they know exactly what to expect.

If you have questions or if we can help in any way, please call our expert team on 01296 468 483 or email info@orangegenie.com.

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