Employment Contracts Under Umbrella Companies

Employment contracts outline the terms and conditions an employee works under the employment of a business.

In the UK every employee is to be given an employment contract within 2 months of the commencement of their employment.

Every employment contract is expected to contain some statutory terms. e.g. job description, rate of pay, holidays, sick pay, notice periods, etc. When an employee is working under an umbrella company, the employment contract may be different from the norm, as it will only apply to the time the employee is actively doing shifts for the employer.

Job Title/Description – Will depend on the duties carried out by the employee for the business concerned. The employee may use the same umbrella company for more than one business, therefore job titles and descriptions may vary per business.

Pay Rates & Place of Work – These will depend on the business locations and arrangements employee makes with the business where the service is being provided. The umbrella company does not determine neither in many cases, as this will usually be determined by the employee and the client employer. The umbrella company only enters rate and details in employment once notified.

Holidays, Absences & Paid Leave – Normal UK contracts of employment allow for four weeks paid leave every year. Umbrella companies do not put restrictions on the amount of time an employee can be off work. If an employee wants a paid holiday, in many cases umbrella companies give them to option of holiday deductions from their salaries, which are paid to the member of staff at the time of their holiday.

Statutory Payments – As per normal contracts of employment, statutory payments ie SMP, SAP, SSP, SPP, are paid to employees of an umbrella company if they meet the statutory requirements laid out by HMRC.

Pension Contributions – The Pension Regulator (TPR), which is the UK regulator of workplace pension schemes, requires that every business employing staff gives them the option of paying into a work place pension scheme. Therefore umbrella companies create such schemes as per the TPR and their contract terms, however it’s at the discretion of the employees whether or not to opt for them.

Notice Period – Umbrella companies normally do not require employees to give notice periods when they are leaving, unlike regular employers, those under an umbrella company can leave without any notice, their contracts normally reflect that fact.

Complaints Procedures – These are different from regular employment. Employees usually have grievances against umbrella companies if they are short paid or cannot get their information required or salaries on time. Umbrella companies may take action against staff if they have presented dishonest information, been threatening to office staff or brought the umbrella company into disrepute.

In summary, the terms and conditions laid out by an umbrella company for its staff are only applicable when the employees work under the company.

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