Terms and Conditions of Employment
You become an employee of the umbrella company and not a director or shareholder, unlike with a personal service company. You will receive your income as salary (plus expenses if applicable) and not as dividend.
Your contract is with the umbrella company and not with the agency or end-client. The terms of the contract are largely in line with the terms of any other contract of employment but with certain differences to take account of the particular circumstances.
Nature of work
When working through an umbrella company, you work under an ‘overarching’ contract of employment (see below), which is worded to indicate continuous employment across multiple assignments. However, your obligations between assignments are minimal.
Provision of work
If the umbrella company does offer you work, and you accept this work, and you sign a contract relating to a particular assignment, you are expected to work on the assignment until the assignment is ended and to complete it to the end-client’s satisfaction.
The opportunity to increase your earnings depends on your own efforts. However, CUL is under no obligation to accept work for you if the terms are not acceptable to us.
We are required to carry out identity checks for all employees. If you are not an EU national, you will be required to supply us with certified copies of your visa and work permit.
You are not normally entitled to subcontract any part of the services being provided to the end client without permission from CUL, and the agency if applicable.
Employment agency regulations
Please see ‘Legislation Affecting Umbrella Company Workers’ for more information.
Place of work
Your ‘permanent place of work’ will be our company offices. Your ‘contract site’ will be the location where the end-client has asked for you to provide your services. This arrangement determines the end-client’s premises as a ‘temporary workplace’ and therefore enables travel and subsistence expenses to be claimed (see Umbrella Company Working: Claiming Expenses’). There may, of course, also be occasions when it is appropriate for you to work from home.
Working hours and rest periods
Because of the nature of the work, you will not have any basic hours of work set by CUL. You will be responsible for regulating your own working time and for taking appropriate breaks as arranged and agreed with the end-client.
Holidays and other absences from work
Because unauthorised absence or absence due to illness could result in a breach of obligations owed to our end-client, it is important that as a matter of professional courtesy you notify both us and the end-client promptly on any day of any absence and that you give your best indication as to how long you will be absent.
Method of payment
- Basic pay. This is calculated on the basis of a standard 7 hour day paid at a rate equivalent to the national minimum wage;
- Holiday pay. This will be calculated as set out above;
- This is based solely on monies generated by you from your assignment and paid by the client to us. This amount may fluctuate depending upon whether any expenses are being paid out by CUL on your behalf by way of salary sacrifice;
- The method of paying expenses, and whether or not these amounts are taxable, depends on the nature of your work (see Appendix 3).
You will be required to complete time sheets, and you will normally be paid on a monthly basis no later than three working days after payment is received from the agency or end-client in respect of any timesheet.
What is an overarching contract of employment and why does an umbrella company need one?
The key issue is that if your contract of employment with the umbrella company were to relate to only a single assignment, the client workplace would automatically become your permanent place of work, and the umbrella company would then not be permitted to claim travel expenses from the agency or end-client on your behalf.
To overcome this issue, your contract of employment is worded to provide continuous employment covering multiple assignments, each carried out with different clients at temporary places of work. This form of contract has become known as an ‘overarching’ contract.
HMRC define a temporary place of work as follows:
- “A workplace is a temporary workplace if an employee goes there only to perform a task of limited duration or for a temporary purpose. Therefore, even where an employee attends a workplace regularly, it will be a temporary workplace and so not a permanent workplace, if the employee attends for the purpose of performing a task of limited duration or other temporary purpose.”
Expense claims for travel are also subject to the ’24 month’ rule which stops a workplace from being a temporary workplace where an employee attends it in the course of a period of continuous work that lasts, or is likely to last, more than 24 months. For this reason you may not be paid travel expenses once it becomes evident that an assignment will continue beyond 24 months duration.
In April 2017, HMRC introduced new rules for individuals working in the public sector on IR35 assignments. The end-client location is now deemed to be the individual’s normal place of work, and travel expenses between home and the client location may no longer be paid to the individual free of tax and NI. This may negate the relevance of the ‘overarching’ contract, but umbrella companies are not changing the contract wording for these individuals until the implications have been fully considered.
Termination of assignments in the case of non-payment by the agency or end-client
You should not provide any services to a client once an assignment has terminated, and you would normally not be paid for any services provided after that time.