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by Rob Crossland

Why a recruiter should refuse a provider “incentive”

September 24, 2010 in Contractor News, Freelancing, Industry comment, Recruiter News

The umbrella company market is pretty competitive with a variety of techniques used to attract Contractor business. Some providers use a more direct to Contractor approach featuring fee promotions and big referral fees. Others try to work with Recruitment Agencies to explain how it all works and get the Recruiters to then refer to (usually via a preferred supplier process) the providers that the Agencies work with. Here at Parasol we do a mixture of Contractor word of mouth of referrals (for a decent fee discount) and work closely with Agencies to deliver service efficiency, fast processing and help them mitigate their risks. I will declare that we sometimes send Recruiters a promotional pen, a mouse mat or even the odd donut drop, but that’s the extent really. We draw the line at providing individual recruiters with vouchers, gifts or cash. Surely what provider a recruiter refers to should be based on the principles of service, corporate policy and a trusted relationship that helps the recruiter get the job done.

Now, it is ok to work with an Agency, disclose an incentive program and for the provider to pay the tax on behalf of the recruiter on their own tax settlement. It’s not a great way to do business in my opinion, but it is legal and with transparency, is used (not by us!). However, in 2010 we have the new Bribery Act to consider and what are the implications for these incentive schemes (official and unofficial).

If a person is being paid without the consent of his employer for passing leads to another business then they would fall within the bribery act. The bribery act creates an offence when “an individual gives a financial or other advantage to another person in return for a person improperly performing his function”  The issue arises if the agency are unaware and say a recruiter has a private arrangement with an umbrella company for the passing of leads in return for a payment (a bribe). However, there will be a number of offences apart from the act of bribery. If the recruiter does not declare the payment then he is likely to have defrauded HMRC he is also likely to be found to be stealing from his employer as his employer will most likely want the payment so his employment could be terminated under gross misconduct and the agency could prosecute him for theft. Until recently the practice largely went on unregulated and is difficult to prove but with the new act in force, Agency owners are going to be more keen to ensure that their future business performance is not blighted by messy cases or reputational damage. I would also challenge the owners of these same businesses to consider the impact in a possible sale of the business in relation to due diligence discovering material bottom line contributions, I think that could also negatively impact valuations.

So it must seem a bit obvious to state, but if an Umbrella comes asking for business on the back of cash or other material incentives, then be really very careful. Todays short term gain could be tomorrows serious pain.

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by Rob Crossland

The expense playing field continues to level

August 20, 2010 in Business Expenses, Contractor News, Freelancing, Industry comment, Recruiter News, Tax

You may have seen that Parasol are founder members of the Freelancer and Contractor Service Association, a trade organisation that seeks to improve the professionalism and transparency of service providers to Contractors and has what we think is the most rigorous and detailed code of conduct. The code of conduct has many parts to it and actually engages with HMRC on the results (we have nothing to hide) but one of the most important part for Contractors, is the standardisation across members of the payment illustration. I’ve previously written about expenses on my blog and other sites for a good few years now and umbrella expenses still remains a constant point of misunderstanding and abuse. So how does FCSA help in this regard? Well, the members have agreed to standardise on both the substance of the calculation and the presentation of the results, more importantly however is that HMRC have been engaged in the overall process. That does not mean it’s HMRC approved, that will never happen for anyone or anything but when you have businesses out there still selling on inflated levels of expenses it’s a step in the right direction. It also means that service and added value becomes the competitive landscape, surely that’s better for everyone in the longer term.

The FCSA membership will grow and the professional providers that adopt the standard will be protecting Contractors livelihoods – claims of 89% net return still exist but trust me, it is too good to be true.

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by Rob Crossland

Real Umbrella Company feedback

July 14, 2010 in Contractor News, Freelancing, Industry comment

First of all, thank you so much for getting back to me so quickly..I really do appreciate it.
I would just like to say (again!) how impressed I am with Parasol. Although I’ve ‘temped’ on and off for years, it’s the first time I’ve signed up with an umbrella company, and I have to admit I wasn’t sure what to expect! I checked out a few companies first, and the thing that really struck me about your company was how you seemed to be dedicated to providing a great service to your customers. So far I haven’t been disappointed…in fact, the exact opposite! You seem to offer a friendly, helpful, yet entirely professional service…and based on my experience so far I’d be more than happy to recommend you to other people in my position.

When you look after over 10,000 contractors on a daily basis, you don’t always get things 100% right but the thing with Parasol is that we aim for 100% and if it’s not perfect we do all we can to make it so. Sometimes things are outside of our control but we always take ownership, sometimes we do get things wrong but we will put our hand up and rectify it. We got lots of really positive feedback and in 2010 it might seem that “testimonials” are old hat or quite often written by marketeers with little basis in truth. I can hand on heart say that all we have ever published is good honest genuine reaction to what we do and I am proud of our record and the dedication of our teams to consistently deliver service excellence. Here is a real example from today and says so much (I think) about our attitude to peoples livelihoods:

“First of all, thank you so much for getting back to me so quickly..I really do appreciate it.

I would just like to say (again!) how impressed I am with Parasol. Although I’ve ‘temped’ on and off for years, it’s the first time I’ve signed up with an umbrella company, and I have to admit I wasn’t sure what to expect! I checked out a few companies first, and the thing that really struck me about your company was how you seemed to be dedicated to providing a great service to your customers. So far I haven’t been disappointed…in fact, the exact opposite! You seem to offer a friendly, helpful, yet entirely professional service…and based on my experience so far I’d be more than happy to recommend you to other people in my position.”

We don’t ask for the plaudits, but are really happy when we get them as it’s real evidence that we care and are dedicated to doing the right thing.

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by Rob Crossland

June Budget 2010 – Contractor win?

June 22, 2010 in Business Expenses, Contractor News, Freelancing, Industry comment, Life, Recruiter News, Tax

So Mr. Osborne delivered his first (seemed short and snappy to me) budget and whilst the devil is in the detail (available here ) here is my take on how it might help (or hinder) Contractors, Agencies and those important end clients. Let’s have a look at the “big things” first:

  • In general terms it appears to be a relatively pro business budget so that for those of us working in this sector, we may feel somewhat optimistic rather than doomed. The counter of is that the “25% cut in department spending” over four years could have ramifications for those working on Government projects. However, as is always possible, that could be actually countered by a permanent headcount freeze and supplemented by Contractors. Let’s not forget that UK Gov is one of the biggest users of Contractors!
  • It appears that the NI incentives to set-up businesses (outside of the land known as the “South East”) will also be helpful and will be interesting to see how that affects single or two person businesses.
  • VAT increase to 20% – could have some cash flow implications for smaller recruiters but providing decent credit control is in place it should not be an issue.

Turning to the real impact on Contractors I think we can say that it is relatively good news at that level (in other aspects it depends on your view on alcohol taxation etc and some of the proposed welfare cuts). I think the general view is that Umbrella contractors will get some benefits and those operating through Limited Companies will also feel some improvements.

  • Umbrella contractors will benefit from an increase in personal allowances to the tune of £1000 and with an increase in the employers NI threshold, the nett position should be an improvement. But what about the rise in VAT I hear you cry! Well, if you claim valid business expenses (and perhaps even more a reason to do so now) then you should be better off. If you’re an higher rate tax payer it could also mean that if you claim expenses and with an increase in allowances, your tax position could be better. The caveat is of course that the expenses must be legitimate and as everyone knows, we do not promote the abuse of this.
  • The reduction in small companies taxation to 20% will also be well received by small business and this will be the case for those operating a Limited Company. Those same companies may also benefit from those changes in employers NI and the commitment to review small business taxation (which includes ir35) is to be welcomed.
  • For some contractors, the increases in capital gains could be a pain if you have an extensive property portfolio but for those that are building up say a consulting business, the entrepreneurs relief improvement is of course welcome.

So – a generally pro Contractor budget in my opinion. It won’t be perfect for everyone but for those of us trying to get on and create some opportunities for ourselves and others, it sounds ok.

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by Rob Crossland

Interesting times ahead – ir35 to go?

May 24, 2010 in Contractor News, Freelancing, Industry comment, Life

So the dust has settled (for now) and our new masters are setting about making the changes they believe are necessary to improve our economy and improve our lot.

In the recently published coalition document there were probably two of three key specific Contractor related matters that come to mind:

  1. IR35 was mentioned along the lines of tax simplification;
  2. Public cuts;
  3. No mention of Agency Workers Regulations (AWR).

For me IR35 and tax simplicity for Contractors is all about “certainty”.  As drafted, IR35 is subjective and, therefore, using the same set of facts two different views can be taken.  If the legislation was clear and could provide a series of specific tests that then produced a balanced answer and that answer met a criteria level then taxpayers, advisers & HMRC would save a lot of time and certainty would be gained for all.

Cuts – I think that in the short term, public spending cuts may have an impact as certain Government department are forced to reduce temporary headcount and then permanent. Once that round is over, guess where they will probably go to then ensure key projects are then delivered?

I don’t agree with some commentators views that AWR will be removed or stopped. This is European wide legislation and therefore cannot be simply put to one side. It may get some guidance updates (welcome) but I can’t see it going!

Let’s hope the new government can address some of the issues that the flexible workforce faces as in my opinion, they are a crucial part of the UK’s recovery process.

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by Rob Crossland

CIPD predict fall in Contractor roles in Public Sector

April 21, 2010 in Contractor News, Freelancing, Industry comment, Recruiter News

The CIPD have today issued a news release which states that any post-election spending cuts could lead to 500,000 job losses in the public sector and that this in turn could have a potentially damaging effect on the umbrella company marketplace.

It is possible that public sector cuts could affect the Recruitment industry as a whole but in general, Contracting is anti-cyclical and the steady uptake in the private sector could counter balance any public sector fall.

If an umbrella company has a critical exposure on public sector contractors via, say, a specific Agency then there could be issues.

I think it is also important to mention that the definition of a public sector contractor is also relevant. There is a marked difference between an agency nurse (for example) and an IT contractor being used on an NHS project. In that example, and there are many, there is a key difference about where the impact will be most felt.

I predict a stable year for the professional umbrella company despite continued land grab strategies (free offers and high incentives to join) at the other end of the market.

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by Rob Crossland

Seasons Greetings

December 18, 2009 in Contractor News, Freelancing, Industry comment, Life

I would like to wish all Parasol Group contractors a very Happy Christmas and a prosperous New Year.  We hope that despite the challenges, 2009 has been successful and we are busy working hard on new solutions for 2010 and continuous improvement in all that we do.

I found out today that since Apil 2006 to March 2009, we have pushed over £1 Billion pounds of contractor income through our business, sometimes you have to step back and say, wow! I hope you would also join me in recognising the great work that the head office team complete on all our behalf’s, thanks.

I hope you and your families have a good break (if possible) and we look forward to working with you in 2010.  I will leave you with a serious picture of that same head office team:

The Team hard at work

The Team hard at work

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by Rob Crossland

Is it me or is being anonymous bad practice?

December 7, 2009 in Contractor News, Freelancing, Industry comment, Life

In our “lofty” position as a market leader (by volume and reputation) we come across a number of new and old Contractor service companies. They sometimes advertise on google using our name as a match and sometimes use low fees as a technique too. All is fair (well not always but let’s not get legal) in love and war but when a new one pops up or an old one uses a campaign, you can’t help but take a peek.

What really astounds me is the anonymity that many companies display. Quite often there is even a lack of the full company details (a legal requirement!) let alone an indication of who is behind it all. May be I am just odd but as a Contractor I wanted to know something about who was looking after my affairs and whilst it can’t be entirely open,  surely something more than “Accountants with x years experience” or “run by Contractors” is  hardly engendering trust.

Is it because the services offered are at the racy end of the tax spectrum? Maybe, but HMRC can get info on most companies if they want so it is hardly a good defence. Perhaps I am barking up the wrong tree here and it’s not a problem for many but a faceless business seems to lack confidence in my view.

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by Rob Crossland

There’s no such thing as a free umbrella!

November 4, 2009 in Contractor News, Industry comment, Recruiter News

So not only can you now have a “full” umbrella service from £5 per week, but also it seems you can have a full service for £0! Yes, you heard it right, no cost to the Contractor. How can that be I hear you cry as you dash for Google and look to save some hard earned cash. Well… the bad news is that Parasol don’t do it and there’s us being all silly with transparency and honesty. No, we know you can’t deliver a true employment based umbrella solution for £0 per week, you can’t do it for £5 but I digress. It seems some providers are marketing free umbrella company services and of course on paper it looks like a great deal. I actually don’t have a major issue with businesses designing and delivering free models but I do have a problem with the economics of the truth.

Some of these new models put the Contractor in a single person limited company as the employee (a one person umbrella in effect) and using something called the VAT flat rate scheme – the provider keeps the difference between the VAT charged (at 15% or 17.5%) and VAT claimed (as low as 9% in some cases). Technically it works and yet I wonder if HMRC intended that VAT Flat Rate to be used in this way? I also wonder if the Contractor is told clearly that the provider uses this mechanism? Of course, should that Contractor run his own Limited Company then that difference would be returned to the Contractor and not a provider.

As I said, technically it works but an industry that does not have the best PR with the authorities, is it wise to be promoting such a solution and not be open about it? As a Contractor you might ask whether you really care as long as you get paid but in my humble view, we should care. If we continue to push the boundaries to the extreme then Government will simply continue to legislate and that will hit Contractors too.

There’s no such thing as a free lunch and there’s no such thing as a free umbrella.

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by Rob Crossland

The dark art of notice periods in a downturn

June 17, 2009 in Contractor News, Industry comment, Life, Recruiter News, Tax

I have noticed on several forums and noted through our own data, an increase in “claims” from Contractors relating to early terminations by Agencies and/or End-clients.  In these difficult conditions it is far more prevalent that an end-client would terminate a contract early and this of course can have a huge knock on effect.

But, what does it mean in the context of working through an Umbrella Company and what can you do if it happens to you?

The first place to start is to try to understand the contractual relationship you are engaged in and what this means both in terms of law and practicalities. If you are working through an Umbrella company then the food chain works like this:

  1. You are employed as an employee by the Umbrella company;
  2. The umbrella company (not you) has a contract with the recruitment agency or end client;
  3. The notice period often quoted in contracts and assignments relates to the notice that the agency/client give to the umbrella. (For peace of mind make sure you know what the specific assignment states in relation to notice on the Umbrella);
  4. You have an employment contract with the Umbrella which will have it’s own employment notice conditions.

If the above is not clear or not understood then there is a tendency when the worse happens (early termination) to raise some form of claim/challenge against anyone that will listen. I should also add that some Agencies don’t always understand the relationship piece and/or sometimes link in the individual.

You must also consider the implications of you “breaking the contract” for a rate increase by going direct or changing Agency/End-client for similar reasons. Don’t be surprised if your Umbrella then has a case to answer to from an Agency/Client and where do they then come to for compensation? (Those Agency to Umbrella notice periods are the issue here) You should also expect to have to change employers as it is probably not a great reflection on that Umbrella and it’s relationship with the customer if they “allow” the practice to be seen as OK.

So what can you realistically expect if you are being professional yet find yourself on the end of an early termination?

  • Don’t panic! A quality Umbrella will have an HR function to support and advise.
  • You should be employed on a guaranteed hours contract (with a qualifying period) and you may be entitled to some wages.
  • You are still employed by the Umbrella and you should work with them to help resolve the issue – it can only help your prospects with that Agency (who are often at the end of the client decision).

It can be very disheartening if an early termination happens and many of the Agency contracts (with the Umbrella) have no notice periods stated so it can be a no win situation. Make sure you keep your Brolly in the loop, work with them for resolution and as an employee of same, you do have rights.  Equally, if you are deemed to be responsible for breaking a contract then don’t be surprised if your employer starts to question the motives.

Times remain challenging and the inevitable can and does happen. It need not be the end of the world and their are some good businesses out there that can help you through it. It’s a tough one when it feels one sided but Agencies (and clients) can also be tomorrows project after the dust has settled.

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