Umbrella vs Outsourced PAYE Payroll – Which to Choose?

What is an umbrella company?

An umbrella company acts as a contractor/temporary worker’s employer. This allows the umbrella company to calculate a contract’s tax, National Insurance, and business expenses. A contract exists between the umbrella company and the contractor.

Umbrella companies charge workers for administering payroll, at a typical average £20 per worker per week.

According to HMRC’s definition, an umbrella company:

• employs a temporary worker (an agency worker or contractor) on behalf of an employment agency, which provides the services of the worker to their clients.
• does not find work for the workers they employ.
• mostly employ workers using an employment contract.
• must comply with employment law.

What is a mini umbrella company?

The Mini Umbrella Company (MUC) model is a derivative of an umbrella. HMRC consider it a fraudulent employment intermediary model which presents an organised crime threat to the UK Exchequer and the temporary employment industry.

There is no standard MUC fraud model and arrangements are constantly evolving as organised criminals try to hide fraudulent activities from HMRC.

These criminals create multiple limited companies, and a small number of temporary workers are employed by each one, set up to enable fraud.

The structuring of the MUC is facilitated by a promoter business that may have linked businesses to support the operation.

HMRC recently (10 May 2021) published guidance on MUC fraud (Mini umbrella company fraud - GOV.UK (www.gov.uk)), which states: “The fraud is primarily based around the abuse of two Government incentives aimed at small businesses – the VAT Flat Rate Scheme and the Employment Allowance. But this type of fraud can also result in the non-payment of other taxes such as PAYE, National Insurance and VAT.”

What is outsourced payroll?

Outsourcing payroll to an HMRC-compliant specialist, provides instant access to payroll professionals who have a duty to keep on top of legislation, the latest technology, and compliant systems. It delivers cost and time savings – and critically, ensures compliance with HMRC legislation.

Opting to outsource payroll to a specialist company like HIVE360 means paying salaries, managing compliances, remitting payroll taxes, maintaining payroll software, and generating reports for in-house use, are all looked after by the payroll provider.

Engage-ing added value

Candidate retention and attraction rates remain top priorities, and what is setting progressive recruitment businesses apart is an embedded employee/candidate engagement strategy that looks after payroll and people.

Our solution goes further to add value to candidates’ experience - HIVE360 provides wellbeing and benefits via our unique customisable engagement app Engage, which is provided as standard element with our outsourced payroll solution.

It gives employees and temporary workers access to a range of benefits and services:  24/7, confidential access to mental health support, counsellors and GPs, a personal doctor, support helpline and care support, gym memberships, high-street, lifestyle, dining and insurance discounts, digital payslips and a real-time workplace pension dashboard to support employees’ financial wellbeing, as well as access to an online training platform.

Make the right choice

Having taken a balanced look at the options, it’s clear recruiters outsourcing workers’ PAYE payroll to a specialist like HIVE360 has to be the only option to guarantee HMRC compliance and efficiency.

If further proof is needed, the cost efficiencies of this model speak for themselves – our analysis reveals that in the first year alone:

• Recruiters outsourcing temporary workers’ PAYE payroll to HIVE360 report savings of £100 or more per worker in the first year.
• A temp agency with 2,000 PAYE temps could see a return of £200,000 per annum.
• An employer with 100 employees could achieve a bottom-line return of over £10,000.

HIVE360 is an expert in recruitment agency PAYE payroll, wellbeing and benefits provision. A GLAA license holder, we are championing a new model of employment administration and redefining employment and pension administration processing.