How will the Agency Workers Directive affect my Umbrella Company?

[WhiteBear101]

Hi experts,

I thought i'd post this question in here rather than in the accounting & legal section. I'm not sure if it will get through moderation but here goes anyway.

I work through an Umbrella Company - have done for about 6 weeks now.

Having spent a bit of time on line recently, it seems like this whole Agency Workers Directive thing is a really big deal. I wasn't in the industry when IR35 was introduced but certain people are saying that AWD could be as damaging.

I guess my question is this....

I want to make myself as marketable as possible, particularly to the recruitment agencies. With this in mind, will I still be able to work through an Umbrella Company in two years time or should I start making plans to setup my own limited company in advance of AWD?

Thanks
WB

[Malvolio]

I'm still digging around the details on this but on the face of it, the threat to give agency workers permanent benefits after 12 weeks in post looks like it will apply to Umbrella users. So as I see it at the moment, either the umbrella providers will have to supply those benefits to their workers - funded, no doubt, out of the contractors gross income - or clients will simply stop using umbrellas for anything other than short-term roles and demand true agency workers or Ltd Co contractors. Either way, it looks to have some potetnially damaging impacts on that corner of the market.

The solution, on the face of it, would be to go Limited yourself. However there's that niggling phrase in the proposal about "working through a Limited Liability Company but not truly self-employed". Simply switching from Umbrella to Ltd may mean you fail that test

Of course it's not going to happen until 2011. We will be in a seriously different world by then.

[Rob Crossland]

Originally Posted by WhiteBear101

Hi experts,

I thought i'd post this question in here rather than in the accounting & legal section. I'm not sure if it will get through moderation but here goes anyway.

I work through an Umbrella Company - have done for about 6 weeks now.

Having spent a bit of time on line recently, it seems like this whole Agency Workers Directive thing is a really big deal. I wasn't in the industry when IR35 was introduced but certain people are saying that AWD could be as damaging.

I guess my question is this....

I want to make myself as marketable as possible, particularly to the recruitment agencies. With this in mind, will I still be able to work through an Umbrella Company in two years time or should I start making plans to setup my own limited company in advance of AWD?

Thanks
WB

Short answer is that a professionally constituted umbrella will allow you to contract now and in the future. The same is of course the case if you set up your own company. As drafted (and we are in consultation) there is also contradictory information on PSC status as part of AWD too.

Many contractors use an Umbrella for the speed of setup and getting a foot on the ladder and then some choose to set up a company thereafter. For an Agency there is less hassle with using an Umbrella but of course most are very happy to work with you via a Ltd business.

AWD will be most damaging for those providers that perhaps take a tax based route to market and will be less onerous for the high end Umbrella space where rights and forms of contingent workforce management is relatively common place.

Main issue is of course that "Umbrella" masks many forms and will BIS have resource and energy to police a difficult area? I hope so.

My advice would be to concentrate on the role and career and use the most appropriate form of trading entity that matches your views on risk and whether you aim to be "in business" or wish to use a professional employment solution.

[Sally BFCA]

In my opinion WB, if you think that you will still be contracting in 2 years time, then you should look into running a limited company.

Even if you are inside IR35, there can still be some financial advantages to be made than that of an Umbrella company.

[Bel]

Originally Posted by Rob Crossland

My advice would be to concentrate on the role and career and use the most appropriate form of trading entity that matches your views on risk and whether you aim to be "in business" or wish to use a professional employment solution.

I completely agree. I would discourage anyone from using a limited company, no matter how long they flexi-work for, for any other reason than to use it as a legitimate business trading vehicle.

The just 'avoid IR35 approach' to using a limited company as just a convenient payment vehicle is no longer a safe option, in my view, and using it as a vehicle for taking up a stream of likely deemed employed engagements is precisely why IR35 was introduced in the first place - to give a label to this kind of 'misuse.'

Unfortunately, one needs to think beyond the personal advantages of saving a bit of tax, and look to the wider implications of what this may signify for everyone else that comprises the 'freelance community' (so called) in the shorter and longer term, particularly now that there are many good brollies on the market these days.

[Malvolio]

So the answer is, here is a piece of ill-conceived, badly drafted and monstrously unfair piece of legislation. Nevertheless we should all simply abide by it and pay extra taxes that we do not owe simply because we are all "deemed" to be employed by our clients at the whim of a politically motivated HMRC and the equality agenda of a discredited and deeply incapable government.

Good plan.

I suspect some may not wish to follow it.

[Trudy Gordon]

Well there are still 6 weeks of consultation left to go and for the time being there is the hope that they will listen to the people, companies and bodies that have taken part.

If you stay in an umbrella company and the legislation comes in you will experience little change apart from a forced uplift of hourly rate if after 12 weeks, it is found that you're getting un-equal treatment regarding pay. Your umbrella company, agency and client will be the ones with all the headache, not you.

There is little reason to switch without more information because we simply don't know how agencies or clients will react. Chances are that when the legislation is ultimately brought in they will have enough to deal with making the necessary changes, giving you time to see which way the market is going and react accordingly.