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The biggest scam in contract employment market?

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  • The biggest scam in contract employment market?

    Sometimes I wonder why authorities fail to act, even when there's a clear need for them to do so.

    We have all heard about zero hour contracts. As bad as they are for most people, it's probably not the biggest issue that needs to be dealt with. This is not to say that it doesn't have to be sorted out as it does.

    I am now going to rant about umbrella companies. In principle, there's nothing wrong with them if they operate legitimately and are used correctly. The problem here is lack of transparency, often caused by cowboy recruiters and not umbrellas themselves.

    In an ideal world I would work for Company A and they would pay me directly, be it a permanent or a contract role. Temping agencies have been prominent in this country for decades. They used to run their payroll so you would get paid by them. They would deduct your tax and national insurance contributions and also pay the employer's NI contributions.

    Sadly, over the last decade this all has been changing. Less and less agencies run their own payroll now. Instead, you got a choice of working through an umbrella (very often you have to use one of their 'preferred' ones) or set up your own limited company. Agencies then have a gall to claim that this is beneficial - well it is from their point of view but contractors mostly end up losing out.

    It is now very common to quote pay rates (especially the daily ones) as inclusive of everything i.e. your holiday pay and employer's national insurance contributions. Top of that you are charged a fee by an umbrella company for 'employing you' (technically they are your employer but practically they are just paying you).

    At a lower end, an umbrella hourly rate of Ł10 would be just a pound or so above the national minimum wage i.e. Ł6.50 + 12.07% holiday + 13.8% employers' national insurance contributions + the umbrella fee, making the real PAYE wage less than Ł8 an hour. You are typically charged Ł25-30 per week by your umbrella company for paying you.

    Umbrellas and agencies have a very cosy relationship. Many umbrella companies refuse to work with you if you source your contracts directly, quoting all sorts of reasons.

    I for one am glad that I have had direct contracts with clients, mainly using my old contacts where I have been on the client's payroll and no charlatans have been involved!

    Unfortunately, this is not always possible. These middlemen are quite clever but you know what, I am here to get you ****ers!
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