If your contractors are employed by an umbrella company it can be difficult to help them when they have queries about their pay. In this article we’ll look at how umbrella company pay works, why queries might be coming to you, and how you can deal with them.
How umbrella company pay works
You will have agreed to pay the umbrella company a daily or hourly rate for the work the contractor completes for your end client. If you also engage contractors directly, the rate paid to umbrella companies is usually higher. This is because amount you pay the umbrella company includes the contractor’s gross pay, and the umbrella company’s margin and costs. You’ll often hear this rate being referred to as the “assignment rate” to differentiate it from the contractor’s pay rate.
While a conventional PAYE employee’s payslip will start from their gross pay, an umbrella company also needs to include details of how they arrived at the gross pay from the amount your agency paid them. So, the contractor will see two types of deductions in their pay documents, employer’s deductions and employees deductions:
Employer’s deductions include- Employer’s NI, Apprenticeship Levy, the umbrella company’s margin, and any other costs of employment like holiday pay and pension contributions.
Employees deductions include- statutory deductions, including PAYE tax and employee national insurance, being made from the contractor’s gross pay.
While this should be simple and easy to follow once it’s been explained, it does make the contractor’s payslip more complex, which might mean you end up fielding some questions about it.
Why your contractors have queries
The occasional pay query is to be expected, particularly if the contractor is not familiar with umbrella company pay documents. However, if you get a high volume of queries this could be because the umbrella is not explaining well enough when onboarding contractors, or their pay documents are difficult to follow. This kind of thing should be fed back to your contact at the umbrella company, so they can make any necessary adjustments.
Umbrella company pay shouldn’t be difficult to understand, so if your contractors are often confused it could be an indication of a wider problem that needs to be addressed.
One area of confusion and a questions often asked is ‘Why am I paying Employees National Insurance twice?’ Be assured that this is not the case. There is one deduction for Employers National Insurance (under the employers deductions) and one deduction for Employees National Insurance (under employees deductions).
Why queries are coming to you
You should expect the majority of payroll queries to go to the umbrella company. They are the experts, after all, and that’s why you’re outsourcing employment to them.
The umbrella should clearly signpost contractors to bring pay queries to their support team, so if you’re regularly receiving payroll queries there could be a reason for it. For example, maybe it’s difficult to get through to the umbrella, or they’re not providing “plain language” answers to your contractors’ queries.
If you suspect something like this might be happening, try asking your contractors why they’re calling you rather than the umbrella, and feedback to your contact at the umbrella company.
If the issues are not resolved
Your contractors already know and trust you so it’s natural that some will bring their questions to you, particularly about something as important and personal as their pay. However, if you’re constantly having to field payroll queries, the service the umbrella is offering you and your contractors may not be up to scratch.
We’d always advise you to talk to your umbrella company contacts whenever there’s a problem, but if things are not improving you might want to look for an alternative umbrella partner.
If you have questions or if we can help in any way, please call our expert team on 01296 468483 or email info@orangegenie.com.