Back in November, we warned about the influx of rogue models. Those which promise high take-home pay, but could actually result in you ending up in trouble with the tax man. As an advocate for the temporary workforce, we’re committed to highlighting non-compliant practices. We do this in a bid to help protect contractors and freelancers who could fall foul to these providers.
Recently Danbro have uncovered concrete evidence of these underhand tactics from one umbrella company. The details obtained by us demonstrate that the payroll provider in question is clearly not paying the correct amount of Income Tax and NICs on behalf of their clients. This suggests that they may be using an offshore or loan model, therefore putting their contractors at risk.
As discussed previously, models which make use of loans to disguise contractor payments will not be tolerated by HMRC. Those who do use them will be clamped down on via a loan charge.
As well as risking prosecution, those umbrella companies who demonstrate a blatant disregard for the law could leave their customers with a significant amount of debt. In one case witnessed by us, a client was left with a debt of £58,000 in unpaid tax and NI!
Deductions required by law such as Employer’s NI (calculated at 13.8% on earnings above £157 per week, rising to £162 in April) and the Apprenticeship Levy (0.5% of gross income) should not vary between providers, other than a small difference for rounding. However, we’ve seen some providers bump up these costs as a way of making more money.
Additional amounts being taken from contractors range from £1 to £10 per payslip. This means if a contractor is paid weekly, they could be paying up to an extra £520 a year in hidden fees.
If you’re unsure about anything, you should speak to your provider, or call us for advice. We want to help temporary workers in making an informed decision. Non-compliant providers are potentially damaging, not just for the customers who trust them, but for the sector as a whole.
Recently Danbro have uncovered concrete evidence of these underhand tactics from one umbrella company. The details obtained by us demonstrate that the payroll provider in question is clearly not paying the correct amount of Income Tax and NICs on behalf of their clients. This suggests that they may be using an offshore or loan model, therefore putting their contractors at risk.
As discussed previously, models which make use of loans to disguise contractor payments will not be tolerated by HMRC. Those who do use them will be clamped down on via a loan charge.
As well as risking prosecution, those umbrella companies who demonstrate a blatant disregard for the law could leave their customers with a significant amount of debt. In one case witnessed by us, a client was left with a debt of £58,000 in unpaid tax and NI!
Inflated Employment Costs
It’s also come to light that some umbrella companies are exploiting their customers. They’ve done this by inflating employment costs to generate additional income.Deductions required by law such as Employer’s NI (calculated at 13.8% on earnings above £157 per week, rising to £162 in April) and the Apprenticeship Levy (0.5% of gross income) should not vary between providers, other than a small difference for rounding. However, we’ve seen some providers bump up these costs as a way of making more money.
Additional amounts being taken from contractors range from £1 to £10 per payslip. This means if a contractor is paid weekly, they could be paying up to an extra £520 a year in hidden fees.
Transparency is Key
At Danbro we take compliance seriously and believe in transparency for our customers. All our umbrella contractors receive a detailed payslip and reconciliation sheet. We ensure all new starters are given a clear illustration on how we get from the money paid to us by your agency/end client, to your take-home pay.If you’re unsure about anything, you should speak to your provider, or call us for advice. We want to help temporary workers in making an informed decision. Non-compliant providers are potentially damaging, not just for the customers who trust them, but for the sector as a whole.
If you’re struggling to interpret your payslip, or if you think your provider is acting in a non-compliant way, call us for free advice on 0800 731 3178 or email us at enquiries@danbro.co.uk
Blog written by
Sam Wright
Sam Wright is Danbro’s Marketing Manager. He produces regular content and feature articles on our digital and non-digital channels – and social platforms – for the Danbro Group and its subsidiaries, as well as having responsibility for the Company’s internal and external communications.
His background is in Journalism and Creative Writing, having previously contributed to publications such as The Daily Post, The Lancashire Evening Post, and The Blackpool Gazette.
He is a keen swimmer and avid Manchester United fan (but don’t hold that against him), and he lives in Lancashire with his wife, Sarah.
