Updated Guidance on Working Through an Umbrella Company
On 9 February 2023, HMRC updated its guidance, Working through an umbrella company, for the first time since November 2022. The update included new material on 'how you get paid' and 'checking your payslip'.
Under the ‘how you get paid’ section, HMRC outlines how the payment process should work when using an umbrella company, from the point the agency worker submits a timesheet to the Employment Business (also known as the temp agency) and the temp agency charges the client hirer, and then covering the temp agency paying the umbrella company the assignment rate, and the umbrella company paying the agency worker.
HMRC adds that it is the responsibility of the umbrella company, as the employer, to pay its workers.
In the 'payslip' section of the update, HMRC itemises the elements that the umbrella company is likely to deduct firstly from the assignment rate it receives from the temp agency before calculating the workers gross pay, and then from the gross pay before working out the workers net pay.
Agency workers are advised to liaise with their umbrella company directly if they have any issues concerning their pay.
This additional guidance provides more clarity to the way in which agency workers use umbrella companies. We recommend that temp agencies, agency workers, contractors and umbrella companies familiarise themselves with these updates and the guidance more generally. For further information concerning the use of umbrella companies, including the advantages and drawbacks, please refer to our previous article on umbrella companies.