Just to avoid any confusion we thought it was worth highlighting the facts behind the administration of umbrella company Paymaster Limited (not to be confused with PayMatters Limited).

PayMasters operated a Pay-day by Pay-day model (which was frowned upon by HMRC) and in a recent employment tribunal it was ruled that the “contractors” working through Paymaster were not in fact employees of Paymaster.

A Pay-Day by Pay-Day model is where the umbrella company applies tax relief for unreimbursed expenses that the contractor has incurred and therefore increases the contractors take home pay. HMRC have said that in respect of any unpaid expenses this relief needs to be claimed annually by the contractor. Pay-Day by Pay-Day models are generally used by umbrella companies where the charge-out rate of the “contractor” is under £9 per hour and hence there is insufficient income to pay the national minimum wage, holiday pay and all the expenses incurred. For additional information on Pay-Day by Pay-Day models please visit: http://www.paymatters.co.uk/news/2011/07/pay-day-pay-day-tax-relief-models

Paymaster Limited went into administration owing holiday pay to “contractors” who worked through its umbrella company. Paymaster itself took the unusual step of defending its tribunal on the basis that the individuals claiming were not employees or workers of Paymaster.

For an umbrella provider to claim that they are not the employer of the individuals it supplies is extremely unusual. Paymatters and other reputable umbrella companies are clear that the umbrella company is the employer.

The reason for the employment tribunal’s decision that the individuals were not employees or workers was basedon the lack of control which Paymaster had over the workers.

Key Points raised were:

PayMaster had not spoken to some of the individuals who worked through them.

There was no regular communications from PayMaster regarding future availability, confirmation of the assignments they are engaged on, hours worked or any obligation on the workers to keep in touch with Paymaster. The only communications were related to payrolls.

Workers who operated through Paymaster were not provided with an assignment schedule and therefore their instructions regarding duties, place of work and assignment rates always came from the recruitment agencies.

The recruitment agencies that worked with Paymaster had input into the way that holiday pay was processed and told workers that they would be working with a ‘payment agency’ (umbrella company) rather than allowing the worker to decide if they wanted to work in this way.

What is also key is that the employment tribunal does not form a legal precedent. It is also possible that a different opinion could have been possible (or the original judgemnen overturned at an appeal) if the individuals claiming against PayMaster had been able to afford representation.

PayMatters Flexible Employees

All individuals that PayMatters employ are spoken to at the start of their employment and on a regular basis. They are given the options available to them and receive a full illustration on the options available (including Umbrella, being paid direct by the agency or working through their own limited company).

Individuals are free to join other Umbrella Company providers.

At PayMatters all our employees working flexible assignments work under an effective overarching contract.

We offer help if our employees are struggling to find new assignments. This is initially through discussion with the agency that placed the last assignment, other agencies that theyor  we have relationships with or available positions included in our job finder and online job board service.

We also guarantee you a minimum 336 hours of hours pay each year which may help if there is a gap between finding new assignments. This is reduced on a pro rata basis for periods of less than a year and is based on your contractual rate of basic pay from us.

Part of the debt owing to flexible workers working through PayMaster was because holiday pay was withheld. Compliant umbrella’s like Paymatters do not withhold holiday pay but include it on each pay run.

At Paymatters would restrict expenses on low paid employees if there is insufficient income to pay statutory entitlements plus all expense incurred. No tax relief is given on unpaid expenses. We do not and have never operated a Pay-Day by Pay-Day model.

About the Author: Miles Grady BA (Econ) ACA is a Chartered Accountant with over 20 years experience and a director of PayMatters. We can be contacted for additional information on 0800 121 6513.