As we all know, the umbrella sector has been under intense scrutiny in recent years, with the focus being on improving transparency, compliance, and fairness for workers. In this context, HMRC’s recent release of the umbrella pay calculator is a welcome development and a step towards a more transparent and ethical sector.
The tool provides workers and employment businesses with the ability to estimate both gross and net pay for umbrella company workers. For those working through an umbrella company, this tool gives a clearer picture of what deductions will be made and provides more visibility into the take-home pay process. For recruitment agencies, it can help ensure greater accuracy when managing pay estimates for umbrella workers.
One key feature of this tool is that it rolls up holiday pay as part of the calculation. While this is an efficient method for some umbrella companies, it’s important to remember that not all umbrella companies apply holiday pay in this manner. The calculation may not accurately reflect an individual’s take-home pay if the umbrella company follows a different procedure for holiday pay.
Additionally, the exclusion of some nuances in individual workers’ tax affairs or personal circumstances may give workers a higher take-home pay estimate than they would receive in reality. Therefore, while the calculator provides an estimation, it may not always reflect a precise or fully accurate amount. We will continue to work with HMRC to help them improve their calculator.
Despite these few shortcomings, this is a welcome step in the right direction. The fact that HMRC has taken this initiative demonstrates a commitment to helping workers and businesses navigate the complexities of umbrella pay with more clarity. More importantly, it may help highlight potential compliance issues, especially with ‘payroll pirates’ who continue to manipulate pay structures to their advantage. By providing a standardised way to calculate pay, HMRC is offering a tool that may expose unscrupulous umbrella companies, which are often at the heart of compliance issues within our industry.
At FCSA, we are committed to promoting high standards of compliance and transparency, and this tool aligns with our mission to clean up the sector. It’s an important reminder that accurate pay calculations, including correct holiday pay practices, are fundamental to ensuring workers are treated fairly.
While this is a positive step, there is still work to be done and no doubt HMRC will improve the calculator based on feedback. This calculator provides an additional layer of transparency but, as always, workers should continue to be diligent and seek advice if they are uncertain about their pay or the calculations they receive.
We at FCSA are pleased to see HMRC taking steps to make the sector more transparent and compliant. We hope that tools like this will empower workers and recruiters alike, and help root out bad practices, ultimately driving a more ethical and compliant umbrella sector.
We will continue to collect our Members’ feedback on the HMRC tool and ensure that feedback reaches HMRC.
