PENSIONS
A guide to workplace pensions for umbrella employees
Saving for the future is an essential aspect to anyone’s career, for contractors, however, it is of particular importance as it can often be difficult to plan so far ahead whilst also juggling their day to day working requirements.
Many contractors make the mistake of thinking they are too young to begin planning for their retirement, and subsequently, hold off on establishing themselves within a pension scheme. Starting early, however, can have tremendous benefits for a contractor, not least being that they are able to retire comfortably earlier than expected.
For contractors operating under an umbrella company, this issue is quite easily solved due to the government’s automatic enrolment workplace pensions scheme. This scheme means that employers (umbrella companies) are legally obliged to administer a workplace pension for employees (contractors).
Workplace pensions
Automatic enrolment was phased into businesses from October 2012, starting with the largest UK employers, with all businesses required to have introduced a scheme by 1st February 2018. These schemes were introduced due to findings that many employees were failing to adequately save for retirement, which could ultimately have disastrous consequences, not only for the employee themselves but for the economy as a whole.
The Workplace Pension scheme sees both employee and employer making minimum contributions towards a pension pot, these contributions increased year on year until April 2019. Percentages are calculated based on an employee’s wage, currently, employers must contribute 3% and employees 5%.
An umbrella company is required to automatically enrol umbrella employees into a pension scheme and make contributions if the following criteria are met:
- Have been contracting with Pay Excel Umbrella for 12 weeks
- Aged between 22 and state pension age
- Earn more than £10,000 per annum
What happens if you already have your own pension scheme?
Any employee can choose to opt-out of a workplace pension. This is often chosen when an employee has an existing pension scheme. The downside of opting out to continue contributing to your own scheme, however, is that you will not receive employer contributions and therefore will miss out on substantial pension savings as a result.
Sterling’s contractor pensions
Pay Excel’s Umbrella pension scheme comes from one of the UK’s leading providers, NEST, a not-for-profit organisation that provides our umbrella employees with a straightforward scheme.
SDC
What is SDC?
Supervision refers to whether or not the work a contractor is carrying out is being supervised by another person within a business, to ensure that work is being done and to the correct standard, this would be within ‘supervision’ guidelines. This can also include supporting the contractor when necessary to develop the skills and knowledge required for the assignment.
Direction will see a contractor being instructed, guided or advised on how to carry out that work at hand by another person. This will include a person coordinating the work to be carried out by a contractor as it is undertaken.
Control is when a person is dictating how the work should be done, as opposed to letting the contractor carry out the work how they wish to. Control can also refer to the power to move a person from one job to another.
Should a contractor fall under SDC, they are no longer able to claim back travel and subsistence expenses, which can ultimately cause issues for those having to travel substantial distances as their take home pay will decrease significantly.
SDC status should be assessed on an assignment by assignment basis, and because of this, a contractor may be wish to carefully consider whether or not a contract should be accepted prior to its commencement, following SDC analysis.
Checking SDC status
Prior to any new contract being undertaken it is vital that it is reviewed with SDC in mind, as this may affect the contractor’s decision as to whether or not to go ahead. At Pay Excel we have a compliance team who will assess each contractors SDC status at the start of each assignment.
A member of our compliance team will ask questions with regards to the assignment itself, the qualifications and experienced required, the amount of supervision contractors will receive whilst on assignment and instruction on how to carry out the assignment. This will ultimately provide significant insight for our team to determine whether or not the contract is subject to SDC and recommendations for how the contractor can move forward.
Still unsure of how SDC impacts you? Contact our team today to discuss further and discover how we can support you throughout the assessment process.
IR35
Working Inside IR35
We’ve put together this article to guide you through the complicated tax legislation that is IR35. In it, we’ll focus on what it means to work ‘inside IR35’, and what you can do about it.
What does inside IR35 mean?
In simple terms, working inside IR35 means that the service you provide is deemed by HMRC to reflect a service of employment, not self-employment.
That means you’re likely to be taxed more, given that contractors operating inside the rules are considered employees for tax purposes.
But who is responsible for deciding if a contract is inside or outside of IR35? Since April 2017 in the public sector and April 2021 in the private sector, the responsibility for assessing IR35 status sits with the end hirer as they are the end-user of your services.
If your end client falls under the taxman’s definition of ‘small’, it will be your responsibility to set your own tax status.:
Professional insurance
As a contractor with Pay Excel you get the following insurance cover:
Professional Indemnity
Professional indemnity insurance covers your umbrella company for loss or damage to the end client for negligent services or advice provided by their business. In other words, if you do sub-standard work and it causes your client to lose money, your umbrella company’s professional indemnity insurance will cover the loss.
Public liability
This covers your umbrella company for legal or compensation claims from other parties for incidents involving their business. Again, this means that if issues arising from your work or your actions as their employee cause injury, loss or damage to a third party, your umbrella company’s public liability insurance will cover it.
Employer’s Liability
As the name suggests, this covers your umbrella company for liabilities that arise because they are your employer. For example, if you are injured while at work the claim would be made against your umbrella company’s employer’s liability insurance. This kind of cover is compulsory for all UK employers.
If you’re employed by Pay Excel:
Cover in place for all employees and CIS self-employed sub-contractors:
Employer’s Liability – £10 million
Professional indemnity – £5 million
Public liability – £10 million