HMRC has launched an umbrella pay calculator, a new free online tool that allows umbrella workers and employment businesses to check umbrella take-home pay and deductions. This may also be very useful when it comes to due diligence.
Umbrella Pay Calculator
The tool allows either a worker or an employment business to enter the assignment rate, umbrella margin, and details about the workers, such as their tax code and student loans. This information is used to calculate the gross pay, deductions, and net pay, enabling users to verify the accuracy of pay or to gain an understanding of what the take-home pay might be.
The umbrella pay calculator tool is only suitable to use for any worker between the age of 21 and the state pension age, and it works on certain assumptions, such as rolled-up holiday pay. In some cases, specific circumstances may need to be considered, for example, different tax codes or deductions. However, if used with these assumptions in mind, it may be a useful tool for employment businesses as part of audit and due diligence processes, as well as helping compliant umbrella companies demonstrate their credentials.
Theresa Mimnagh of Lawspeed commented: “as highlighted in the guidance, there are risks of working with non-compliant umbrellas. Due diligence, setting clear compliance and operating expectations and solid protective contracts are an essential part of the process of controlling and mitigating those risks, and protecting against common mistakes. Payslip verification can be part of that process, give an agency confidence in an umbrella and even help establish a defence against liability. A compliant umbrella will not usually have any issue with a reasonable request for evidence of compliance, but strong contracts can help set this expectation”
Due diligence will become increasingly important when proposals from the recent budget are published in the spring finance bill. These proposals aim to address non-compliance in the umbrella company market, including a greater transfer of PAYE tax debt to agencies and hirers.
The new tool can be found here and is accompanied by updated guidance which addresses some of the risks of working for, or with, a non-compliant umbrella.
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