The main advantage of working through a payroll company is that you are able to offset some expenses against tax, therefore increasing your take-home pay. CK Associates will have a contract with the payroll company, reflecting the contract we have with the hiring company or client, and you will have a separate contract/agreement with the payroll company reflecting the same terms. Effectively you will be employed by the payroll company.
The payroll company will charge you for processing your pay, either per invoice or as a percentage of your pay. This cost varies from company to company and you should research this thoroughly. CK can provide you with a list of our preferred supplier payroll/umbrella companies on request.
The payroll company will pay Employers’ National insurance on your rate at 13.8%, which is deducted from the rate you would get if you were not an employee (the “Limited Company rate”). You are also entitled to a statutory minimum of 5.6 weeks holiday per annum (which works out at 28 days for a full-time worker). The payroll company may hold back a certain amount of your pay so that you get paid at your normal rate when you take leave or they may pay you for the holidays you have accrued every time you get paid (in which case any leave you take will be unpaid at the time of taking it). You should clarify with the payroll company what their policy is with regard to holidays and any other benefits available.
You will be required to submit your approved CK timesheet at the end of each week, as for a PAYE employee. You will also be asked to complete timesheets for the payroll company so that they know how much to invoice CK for your services. We then pay the invoice received from the payroll company and then they will pay you as per the agreed payment terms you have with them.
The payroll company will cover you for Employers’ Liability Insurance, Public Liability and Professional Indemnity. Most payroll companies will cover up to £5 million as standard. CK Associates will require proof of this cover from the payroll company.
Tax and Expenses
Please discuss your tax situation and how this will be handled with the payroll company. With regard to expenses, the situation is the same as PAYE in that you may only claim expenses from CK that the client has agreed to pay. However with a payroll company you can offset other expenses such as your travel to work, lunch etc. Again please ask the payroll company to give more details of this, as it varies from company to company.