Employer Benefits

Highlighting the benefits of PAYE over Umbrella.

PAYE V UMBRELLA example

With PAYE your worker will be better off by £1019.61

Outsourced PAYE

Pros

• PAYE is a far more COMPLIANT way of outsourcing your payroll and is the preferred method of doing so when it comes to HMRC.

• No in-house payroll team needed as all payroll labour and its costs are dealt with by the outsourced PAYE Company.

• Outsourcing through a PAYE company is MORE COST EFFECTIVE for the agency than using an umbrella company.

• Takes away the hassle of worrying about getting your workers paid whether you have 3 or 3,000 workers.

• Though your hourly rates may look lower to the workers than if they were going through umbrella their TAKE HOME PAY WILL BE HIGHER. (see example). National minimum wage will always be met as with PAYE there are no expense deductions or admin fees.

• It is a lot easier for your workers, all they have to do is submit their time sheets for the hours that
they have worked.

• There are no expense verification processes needed to ensure that all expenses fall in line with SDC rules, therefore there will be no breaches of “regulation 80” here, meaning that PAYE is a far more COMPLIANT payroll solution.

• You keep full control of the holiday pay so this does not need to be rolled into their hourly rate.

This means no mistakes can be made which could compromise national minimum wage not being paid to the worker.

• Save on Insurance costs as workers will usually be covered by the PAYE companies insurances (public liability driver’s negligence etc.)

• All liabilities are paid including RTI submissions and RTI remittances. This means that PAYE is 100% COMPLIANT (proofs are available to the agency at any time).

• PAYE gives the worker access to an online portal
for them to log in to view their payslips so they can see that all the necessary liabilities have been
deducted from their wages. They can also print wage slips off from here and there is an option for the worker to receive an SMS text message showing their net pay the day before they get paid.

• There is no risk of your workers getting caught out under the disguised employment or disguised remuneration changes announced in 2016. This is because income paid is full PAYE, all liabilities are paid, no expenses to be considered therefore fully compliant and no grey areas.

• TUPE regulations will also be met with PAYE. Your employment contract will be mirrored and available for your workers to view on their online portal.

Cons

• If the worker is not working under supervision, direction or control (SDC) of the agency or end client they will be able to claim legitimate expenses and may be better off (Someone earning 35,000 per year would need to claim well over £6000 in expenses for this to be true, see example attached)

•Your rates of pay may look less attractive to the candidates as Umbrella Company advertised rates include rolled up holiday pay and employers National Insurance. (However here at Worldwide using the example in this brochure and other tools we have a way to explain this to your workers quickly and easily)

Umbrella

Pros

• No in-house payroll team needed as all payroll labour and its costs are dealt with by the Umbrella Company.

• Takes away the hassle of worrying about getting your workers paid whether you have 3 or 3,000 workers.

• Your rates look more attractive to the candidates as they include rolled up holiday pay and employers National Insurance contribution.

• Your workers can claim expenses (where applicable).

• Save on Insurance costs as workers will usually be covered by the umbrella companies insurances (public liability, driver’s negligence etc.)

Cons

• All Umbrella companies will charge a weekly or monthly fee from the money your workers receive meaning that if they are unable to claim enough expenses they will end up worse off than if they were being paid PAYE (meaning they may start using an agency that uses PAYE companies as an option if you don’t).

• Workers who earn above national minimum wage could unknowingly be getting employment costs such as employer’s National insurance

taken directly out of their hourly rate meaning they are earning less per hour than originally quoted.

• There are some unscrupulous Umbrella companies who may not be paying all the taxes due to HMRC.

• Even if the worker is able to claim £500 worth of expenses per month due to the other costs they will incur from the umbrella company their take home would be more through PAYE. (See example).

• As your rates include rolled up holiday pay and employers National Insurance contribution, if errors are made when calculating this it can drop the worker below the legal minimum wage threshold.

• The HMRC has announced changes to the way Umbrella Employees claim expenses. These changes restrict Umbrella Employees from claiming tax relief on travel expenses if you are subject to the supervision, direction or control (SDC) of the agency or end client. If this is the case for your workers then they will no longer be able to claim travel expense. If it is found that the worker has been making false expenses claims then under “regulation 80” if the umbrella company is no longer trading you as the agency will be liable for 100% of the charges, penalties and fines. 

Regulation 80 is a formal means of recovering unpaid PAYE tax.
It gives HMRC power to determine the tax that is due from an employer but remains unpaid.

Download a copy of this information Here

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