Traditional PAYE Umbrella solutions are no longer delivering optimum returns for contractors

Traditional PAYE Umbrella solutions are no longer delivering optimum returns for contractors

PAYE Umbrella is a payroll mechanism which involves a third party employing agency contractors who work under a fixed term contract assignment. The Umbrella company takes away part of the employment cost from the recruitment agency, passing it onto the worker and in turn, processing each employee’s expenses to alleviate the effect of this additional cost.

The word “Umbrella” has been used many contexts (right and wrong) resulting in it losing its original meaning. In 2000, the term “Umbrella” stood for “higher net returns” from a contractor’s perspective, recruitment agencies understood it as “higher profit margins” and the term itself stems from the use of over-arching employment contracts which enable the model’s operation.

But if you were offered an “Umbrella” solution today, would you have the same positive reaction?

Chances are you wouldn’t, because the term seems to have lost its positive acceptation. With Umbrella having gained so much popularity, the number of operators increased and although it is a seemingly-simple model to implement, compliance and customer service are key.

Unfortunately, the pound sign at the end of the tunnel led some operators and recruiters to neglect these aspects and over the course of the past 15 years, the Umbrella’s industry has become tarnished – bad news travels fast, doesn’t it?

Despite this, PAYE Umbrella quickly became the most popular outsourced payroll model on the market, empowering recruitment agencies to maximise profit from their existing client pool without even having to re-negotiate charge rates, whilst their contractors benefitted from higher net returns to compensate for their expenditure on travel and subsistence.

The model actually worked very well up until the 6th of April 2016, when the Government released revised fiscal legislation limiting workers’ eligibility to have the aforementioned expenses offset against their taxable income. Thus, today’s PAYE Umbrella models deliver substantially lower returns for contractors, although this does not mean they have disappeared completely – recruitment agencies are still resorting to traditional PAYE Umbrella for their lower-paid workforce who are not suitable for Personal Service Companies.

This is where infrastructure truly comes into play: unlike most PAYE Umbrella providers who rely on a small team and a single model for their survival, Plus are in a position where they can allocate considerably more resources to stay competitive, and with minimal risk.

Our new model, priced at only £12.50 per week (typically half that of our competitors) will greatly benefit contractors already enrolled on similar schemes whilst maintaining their agencies’ savings and complying with current as well as future legislation.

The model’s motto is “Look for the Plus!” because contractors will immediately notice an increase in their net income, which will inevitably lead to a happier workforce for the agency.

Why offer a low cost solution? Because we care, but most of all… because we can!