What do umbrella companies do and is there any point using one to do locum work?
We have been working with locums in the legal profession for over 10 years now and it seems to be a fairly recent phenomenon that a very small minority of our locums and other locums we’ve come across employ the services of an umbrella company to handle their administration when taking assignments.
We also know that some recruitment agencies insist on their locums using particular umbrella companies when working on assignments through that particular agency.
However, despite regular telephone calls from umbrella companies to us attempting to suggest we recommend all our locums use them, we have never felt it necessary to either recommend the use of an umbrella company or to actually use one for assignments, and wonder if anyone can explain what benefit if any an umbrella company offers them as a locum.
Incidentally if umbrella companies wish to reply we will post their response in full on this website, and similar if any locums want to contribute to the discussion we would be happy to post their replies.
Our response to the question above is that, as far as we can see, there is no point whatsoever using an umbrella company unless you like handing over a proportion of your earnings every week for very little reward? It seems to us that umbrella companies simply cream off a percentage of your earnings in return for undertaking a very small amount of administration that you could quite comfortably do yourself, particularly because you are legally qualified and as such ought to have an aptitude for dealing with official forms. In fact, we have heard from a couple of people who have used umbrella companies that the umbrella company do some of their administrative work and they end up doing a fair bit themselves anyway.
We understand that other agencies actually recommend specific umbrella companies and again we are not sure why this is. Have certain umbrella companies demonstrated to that particular agency that they are particularly gifted in what they offer or do, or is it the case that the agency are getting paid referral fees by the umbrella companies concerned? We have been approached by umbrella companies offering us commission on every locum we refer through to them and it has always been our response to politely decline simply because we see no benefit to the locum to use an umbrella company. Naturally the money from the umbrella company would be most welcome!
Our solicitor and legal executive locums work on a self-employed basis and invoice our clients directly. The vast majority of our assignments are short-term holiday & sickness cover.
I wonder if the justification for umbrella companies is again linked into longer term assignments where presumably the HMRC could in certain circumstances suggest that the person providing the locum work is not actually self-employed because they are tied in for a long period of time to the same firm. There have been issues in the past generally in the industry with pay for self-employed agency workers. We have always assumed that this is simply in industries where it is almost virtually impossible to be classed as self-employed because of the high degree of control an employer has over the individual.
Perhaps an umbrella company would like to respond to the queries :
- What is the point of a contractor using you?
- What benefits do you offer?
- What response have you got to the suggestion that in fact you are simply taking a percentage of earnings away from someone who does not need to use your services?
Responses from Umbrella companies awaited with interest. We’ll even publish your website address as an extra bonus…
Jonathan Fagan is Managing Director of Ten Percent Legal Recruitment, specialists in both permanent and locum recruitment, the locum element being undertaken through www.interimlawyers.co.uk. You can contact Jonathan for press comments at firstname.lastname@example.org.