Pay Model Options – PAYE, Umbrella or Both?
The past 9 months have seen an unprecedented period of difficulty across all sectors of the economy, including the recruitment sector.
However, what is always worth remembering, is that times like this are often the best to review and amend current policy and practice.
Many recruitment agencies currently offer either a PAYE or Umbrella model of pay. What if there was a solution available that offered both models to workers? This would enable agencies to continue to advertise at the higher Umbrella rate of pay, while also being able to offer a more standard PAYE solution and the all-important choice to the worker. All this at no additional cost to the Agency!
PAYE and Umbrella – the offer?
New Red Planet have worked within the recruitment sector for the provision of payroll for over 10 years now and we have seen many changes over the years. Since T&S legislation 2016, Criminal Finance Act 2017 and the Public Sector Legislation 2018, some in the sector have questioned the advantage of standard Umbrella payroll.
New Red Planet have been working with agencies for the past two years to provide the PAYE solutions that many working in the recruitment sector, and their representatives, seem to prefer. New Red Planet can do this without the need for recruiters to take on the worker’s employment status and the associated liabilities that can accompany this: SSP, SMP, SPP, insurances and Furlough to name a few.
New Red Planet is also able to provide this service at no additional cost to the agency and so enable them to continue working to fixed margins – as they currently do when using standard umbrella solutions.
How does it work?
New Red Planet still receive the same Umbrella rate of pay from the agency. However, when NRP register and onboard the contractor, they give the worker the option of two types of payroll: Umbrella or PAYE.
The worker is then talked through both options at registration and are given the choice of payroll they feel best suits their needs.
There is a slight difference in the daily rate paid to the workers:
- Umbrella model (slightly higher): the worker pays all the employer’s costs and the margin to the payroll company
- Hybrid PAYE rate (slightly lower): the worker will not pay the Employer’s NI, Employer’s Pension, Apprentice Levy or Margin to the payroll company. They will simply pay their own Tax, NI and Pension.
Benefits to both the worker and agency
The appealing aspect of going through the PAYE solution is that the worker will often take home more pay each week than through standard umbrella. PLUS, agencies may become eligible for a rebate due to the savings in employer’s costs.
(Example of a worker offered an umbrella rate of £100 per day working 5 days per week and alternative Hybrid PAYE rate & dependent on margin charged).
New Red Planet always welcome feedback from contractors and clients and the overwhelming message is that the choice of a 2nd model is exactly what is wanted throughout the supply chain. Hybrid PAYE model is simple, precise, and gives the contractors exactly what they want while working through a payroll company, while the Umbrella option allows some workers to continue with a model they have been happy with for years.
An additional benefit is that both NRP and our clients have seen a substantial reduction in payroll queries for workers going through the Hybrid PAYE model. This enables recruiters to spend their time generating new business rather than dealing with payroll issues or queries from candidates.
To find out more about the solution and how this can greatly benefit your recruitment business, please do call, or email Steve on the details below:
Steve McDermott: Business Development Manager
T: 0161 713 1730
M: 07854 881 220
Find out more
If you would like to know more about New Red Planet Products or services, request an information pack by completing the quick form below