Frequently Asked Questions

What is a payroll umbrella company?
A payroll umbrella company is a company that employs freelance workers who work on numerous different assignments, at various locations, either through agencies or directly for end-clients. The umbrella company, enters into an employment contract with the worker and a service contract with the client or agency.

This way of working differs from limited company working in that the freelance worker does not own shares in the umbrella company and is one of many such workers employed by the company.

Competex Pro is the only payroll umbrella company that specialises in looking after interim managers and independent professionals.

What is the difference between Competex Pro and other payroll umbrella companies?
Whilst other payroll umbrella companies handle freelance workers of any and every description, Competex Pro specialises in looking after interim managers and independent professionals. As an organisation we have 20 years’ experience of looking after this group of people.
How much does it cost to work through Competex Pro?
All payroll umbrella companies cover their costs by taking a small administrative margin from the fee income earned by each of its employees before processing salary and expenses. This is not a separate fee paid by the employee and no VAT is involved.

Our administration margin is £120 per month, deducted from the first payslip each month irrespective of how many times you are paid within the month.

We discount this fee by 20% for Competex Ltd clients with active limited companies and for candidates working through agencies with automated time sheet and accelerated payment systems.

The full margin of £120 is equivalent to £54 paid out of income taxed at 40%, and we are confident that you will more than recoup this expense by working through Competex Pro rather than through any other payroll umbrella company.

Why will I be better off by working through Competex Pro?
Because we have some 20 years’ experience of looking after interims and independent professionals, and because our staff have significant knowledge of this marketplace, we have set out to create an environment that is as similar as possible to working through a company.

We have created a structure that allows our ‘employees’ to claim all normal expenses of employment out of their ring-fenced fund, before processing salary and therefore tax free. This is in contrast to other payroll umbrella companies that restrict expenses to those claimed from the end client.

What are the implications of work in the public sector through my own company?
If you continue to work through your own company, your fees will arrive into your company as fully taxed income. This means that you will be obliged to pay the expenses of running your company out of taxed income.

The exception is that if you also carry out non-IR35 private sector work in the same year, or in the following year, you will be able use these funds to pay the company running costs.

Why does my agency insist I work through an umbrella company?
You will usually be encouraged to work through an umbrella company only if you are working in the public sector. If your work is in the private sector, you need work through an umbrella company only if your assignment is relatively short and you do not expect to carry out any further assignments in the near future.

Although it is still possible to work through a limited company in the public sector, the new ‘Off-Payroll Working’ legislation is making this way of working extremely onerous for all concerned and there are still a number of administrative issues not yet fully resolved by HMRC.

The payroll umbrella company model is therefore becoming the more favoured option by all concerned in light of the new changes, being the most straightforward solution to the problems created by the new legislation.

Competex Pro handles all the commercial, employment, taxation, and statutory issues associated with the hire of interims and consultants, so that your agency or end-client doesn’t have to.

How long does it take to get set up with Competex Pro?
The necessary registrations can be carried out in less than 24 hours, subject to your providing us with the correct ID documents upon registration.
What are the steps taken to get set up and ready for work?
  1. When you secure your assignment, you need to negotiate fees and expenses, and the number of days each week that you will be working.
  2. You then need to register with us online, submitting your details and those of your agency or end-client. (However, please feel free to telephone us if you have any queries.)
  3. We will ask you for and you will need to send us normal ID documentation.
  4. We will make contact with your agency ahead of signing contracts.
  5. We will register you on our payroll software.
  6. We will issue a contract of employment to you, the terms of which may be viewed here.
  7. We will sign a service contract with your agency (or end-client if you are working directly for them).
What happens once I am on assignment?
You will need to agree with your agency or end client how often to submit timesheets and expense claims. Authorised timesheets are then passed to your agency, who in turn will copy them on to us. Your agency will then invoice the end client and Competex Pro will invoice the agency.

If you are working directly for the end client, so also Competex Pro will work directly to the end client.

Once we receive your timesheets and expense claim forms, and we have received payment from your agency or end client, we will pay you and issue you a payslip. Some agencies operate accelerated payment systems in which case you can expect to be paid extremely promptly.

Can I move to Competex Pro from another payroll umbrella company part way through an assignment?
Yes.
What happens after I have finished my assignment?
If, after a period of three months following the end of an assignment, or sooner if requested, you are not imminently about to start a new assignment, we will notify HMRC that you have ceased employment and issue a P45.

You would of course be very welcome to return to Competex Pro at a later date if the opportunity arises.

Does Competex Pro provide work-finding services?
Neither Competex Pro nor any other payroll umbrella company ever provides work-finding services of any kind. This is the role of the interim providers and agencies. Although you become an employee of Competex Pro, you will be paid only when you are on assignment. In return, and unusually in an employer-employee relationship, all the funds that you earn, less a small administrative margin, are ring fenced and used to pay you salary, and expenses.

You have no obligations to the company between assignments and it follows that you are not obliged to keep yourself available for work between assignments.

The onus, therefore, is on you to find your own work, and Competex Pro will of course normally be very happy to provide the framework within which you can operate. However, please be aware that we are under no obligation to accept work for you, and to arrange for you to work through us, if the nature of an assignment is not acceptable to us.

Should I get set up with Competex Pro now or wait till I get my assignment?
Because the registration process is quick, there is no need to get set up with Competex Pro before securing an assignment. However, it may be sensible to make contact with us in advance to let us know you intend to work with us, and we can answer any questions you may have.
Can I start work before I am registered with Competex Pro?
This would be unusual, but we can resolve any such situation if it arises. Therefore if your client wants you to start work immediately, we will be happy to regularise the position for you after you have started work.
How is my pay structured?
When you work through Competex Pro the fees and expenses paid by the client, for the work that you undertake on assignment, are kept in a ring-fenced ‘fund’ that is personal to you and devoted entirely to supporting you as one of our ‘employees’. After deducting our administration margin, this fund is used to pay:

  • Your pension contributions if applicable (paid free of tax)
  • Any other expenses of employment due to you and paid free of tax, but only if allowable by HMRC.
  • Employer’s National Insurance on your salary
  • Any other costs of employment that may be applicable (e.g. Automatic Enrolment, Apprenticeship Levy)

The entire remainder of the fund is paid to you as salary, from which tax and employee’s National Insurance is deducted.

Your salary is calculated in three parts:

  • Basic pay for the time worked, calculated at the national minimum wage rate. The use of national minimum wage is an expedient used by all umbrella companies, enabling them to comply with all the legislation associated with flexible working and the AgencyRegulations. It does not affect the total amount paid to you as an employee.
  • Holiday pay, based on the national minimum wage. Since you are classed as an employee with flexible working arrangements, we are obliged to pay holiday pay. This is paid to you month by month based on the number of days worked in the month, so ensuring that you are paid the maximum funds available as early as possible.
  • Bonus, which represents the entire remaining balance of all available funds.

Although calculated as described above, the basic pay and bonus are brought together as a single figure referred to as ‘pay’ on your payslip.

How does the ‘ring fenced’ fund work?
Working as an interim or independent professional through a payroll umbrella company is similar in certain respects to working for a consultancy company. However, when you work for a normal consultancy company, you expect there to be a normal working environment with a normal employer-employee relationship. Furthermore, you would expect to be paid while on holiday, and in principle, you would expect your salary to be fixed and unrelated to the fees you are able to generate for your employer.

When you work through a payroll umbrella company, you work as an employee of the umbrella company but now, unusually, all the fees you earn (less a small margin take out of these fees by the umbrella company to cover its costs) are ‘ring-fenced’ and used exclusively to pay your salary, the statutory costs of employing you (eg Employer’s NI, Automatic Enrolment, and Apprenticeship Levy) and any personal tax-free expenses.

Whilst now your salary is not fixed, you do now have the entire ‘ring fenced’ fund to your name. But it has to pay for everything. Your salary is now a flexible salary and the amount that is paid as actual salary out of the ‘ring fenced’ fund depends on the personal tax-free expenses you can claim and the costs of employment paid on your behalf. And of course this all ultimately depends on your personal earning power.

What expenses can I claim free of tax and National Insurance?
The expenses that may be paid to you free of tax and National Insurance are determined entirely by HMRC regulations, but you may claim all normal expenses of employment from Competex Pro regardless of what may or may not have been claimed from the client.

To the extent that expenses may have been claimed from the client in excess of the expenses that are permitted to be paid to you by HMRC, then the excess will be added to your fee income and taxed in the normal way.

More on expenses here.

Do I need to take out insurance?
No. The following insurances are included as part of our package.

  • Professional indemnity: £1,500,000 limit of indemnity
  • Employer’s liability: £10,000,000 limit of indemnity
  • Public liability: £10,000,000 limit of indemnity
Can I pay personal pension contributions out of pre-tax income?
Yes. We will arrange to pay pension contributions to a provider of your choice by way of salary sacrifice.

If you feel that any questions have not been answered adequately, or if you have any other questions that you would like us to answer, do please feel free to email us.

Amy FowlerCompetex Pro: Frequently Asked Questions