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Redego FAQ’s

Many of those new to contracting ask us questions which we have answered countless times. We have therefore compiled this FAQ which is made up of the most common questions we are asked (hence ‘Frequently asked Questions). If anything is not clear, please get in touch with us and we will explain any questions you have.


What is an Umbrella Company?

An Umbrella Company acts as employer to independent contractors who work under a temporary contract, usually through a recruitment agency.

Unless you work PAYE, recruitment agencies will only issue contracts to a limited company (they cannot engage sole traders). Since the introduction of the Managed Service Companies (MSC) legislation in the 2007 Budget, the only way a contractor can comply with this requirement is to set up his or her own PSC or use an Umbrella Company.

An Umbrella Company issues invoices to the recruitment agency (or client) and, when payment of the invoice is made, will typically pay the contractor through PAYE. Umbrella Companies have become more prevalent since the government introduced so-called “IR35 ” legislation that makes it less beneficial to start your own PSC and increasingly attractive to join an Umbrella Company.

In December 2006, the UK Treasury introduced the draft legislation, “Tackling Managed Service Companies,” which sought  to address the use of composite companies to avoid Income tax and NICs on forms of trading that the Treasury deem as being akin to being “employed.” After a period of consultation and re-draft, the new legislation became law in April 2007, with additional aspects coming into force in August 2007 and January 2008


What is my employment status?

You are a full time employee of your Umbrella Company. As an Employee, you are entitled to the statutory rights of all employees. Under your Redego contract of employment, your main place of work is your home address, so you would be expected to travel to and from your contract locations.


What about my PAYE and NI liabilities?

Unlike being self employed where you have to complete your own self-assessments, working through an umbrella company means that all your tax liabilities are calculated and paid to the HMRC before you receive your salary. In this respect, working through an umbrella company is similar to working in any other full time job role.


What is a dispensation?

Dispensation (sometimes referred to as ‘scale rates’) are a bone of contention among many umbrella companies. Essentially a dispensation removes the requirement to report expenses and benefits to them at the end of the year on forms P11D or P9D. However, a number of Umbrella Companies mislead their contractors by informing them that by having a dispensation there are able to claim expenses that they would normally not be able too. You must remember that it is you and not your umbrella company who are liable for any underpayment in tax. You are only able to claim expenses that are ‘wholly, exclusively and necessarily incurred in the completion of your contract’.


What is the 24 month rule?

One of the main benefits of working through an Umbrella Company is the ability to claim expenses. This is allowed because under your contract of employment with Redego (or any Umbrella Company), your place of work is your home address, and you are able to claim the expenses that you incur travelling to and from your temporary contract locations. The important element of this is the term ‘temporary’. The HMRC have said that if you work for 24 months or more at a single location, you cannot be deemed to be a contractor, and as such you cannot claim expenses.


How quickly will I get my money?

Redego will always make payment to you the same day that funds enter our account. We pay around 90% of our contractors via Faster Payments (FPS), which means the funds are cleared into their account within two hours. The rest of our contractors are paid via CHAPS (as some banks and building societies don’t accepts FPS) which still clears into your account the same day, but could take a little bit longer.


Why do I have to pay national insurance twice?

When you are employed directly through an agency or conventional employer, they would have factored in how much Employers National Insurance they will need to pay. E.g. if you are earning £30k per annum, your employer knows that you will cost them £30k + Employers NI contributions.

Your Umbrella Company will be unable to absorb your Employers National Insurance costs, as the only money your Umbrella Company makes from you is the weekly (or monthly) fee that they charge.

As a result of this additional tax that you will need to pay, agencies and clients will often offer you a higher rate if you decide to use an Umbrella Company. It is always good to check your rates with your Umbrella Company as they will be able to tell you whether or not your higher rate will cover your Employers National Insurance contributions.


What costs are associated with Redego?

The only cost associated with Redego is the weekly (or monthly) fee that you are charged to use our services. Nothing else. We don’t charge you extra to receive your funds quicker as we strive to get the money in your account as fast as possible. We don’t charge you for joining or leaving and we will only charge you a fee when you work. Our fees are treated in the same way as an expense and are deducted before you are taxed, so the fee that you are quoted by Redego will often be the before tax fee. The actual cost to yourself could be over 50% less!


Am I working inside or outside IR35 if I use Redego?

Recent legislation has meant that all Umbrella Companies have to pay their contractors PAYE, so all umbrella companies are now inside IR35


What expenses can I claim?

The standard expenses that can be claimed are travel (to and from your contract locations) and subsistence (food that you consume while you are working). The HMRC will allow any expense to be claimed which is wholly, exclusively and necessarily incurred in the completion of your contract. Redego must be satisfied that the expenses you claim match this criteria, so you may be asked to give additional proof when claiming certain expenses. All expenses that are claimed must be confirmed by way of receipt, which Redego will keep for six years.

Remember that it is you, and not Redego who will be liable if any expenses are not genuine, and the HMRC could ask you to repay any tax benefit that you have received.


What about holiday pay?

All employees are entitled to statutory holiday, which is currently set (as of August 2009) at 28 days per year (including bank holidays). Because Umbrella Companies only make money from their weekly fees, your pay is split into basic and bonus. You are paid minimum wage based on the hours that you work, and everything else is paid to you as a bonus (you end up with exactly the same take home pay). We will then make a small deduction to cover your statutory holiday pay (usually around £25 a week), which is displayed at the very bottom of your payslip. These holiday deductions are yours, and you can opt to have them paid to you whenever you wish. Some of our contractors want them paid back to them every week (so a deduction is shown on your payslip, and then reimbursed back to you), while others like to accumulate it until they take time off work.

We are unable to issue you with a P45 until we have paid all holiday pay back to you, so even if you forget about your holiday pay, we wont!


What about sick pay?

Part of your statutory employment rights (the rights that all employees are entitled too) is that you are entitled to statutory sick pay (SSP). This can be claimed if you are ill for at least four days in a row (including weekends and bank holidays and days that you do not normally work) and earn at least £95 a week.

The current rate for SSP is £79.15 per week

You will have to provide Redego with a doctor’s note before we can pay you SSP. You will start being paid SSP from the fourth day that you are ill. For example, if you are ill for seven days, you would be entitled to 4 days SSP (£63.32 or £15.83 per day)


What insurances am I covered by?

When you join Redego, you become covered by the following insurances:

Professional Indemnity Insurance- £10m

Employer Liability- £2m

Public Liability- £2m

Our insurances cover most job types, but it is worth checking with us to make sure that you are covered.


What extra benefits do I get from using Redego?


How does your online calculator work?

Our online calculator calculates your estimated take home pay based on your hourly (or daily) rate, the number of hours (or days) you will be working and the value of expenses that you intend on claiming.

Many other Umbrella Companies will not ask you for the value of expenses that you will be claiming, instead they make an ‘assumption’ of that value will often result in a higher take home pay. We have found that this can make contractors disappointed when they receive their first weeks pay and it is not as high as they had been led to believe. Redego knows that no two of our contractors are the same, and value of expenses can vary greatly. We therefore leave it up to you to decide which expenses you intend on claiming. For more information on expenses and what expenses you can claim, please visit our expense guideline page


What if I don’t have a P45?

If you do not have a P45 from your previous employer, or they have not sent it to you yet, you can complete a P46 once you sign up with Redego, which will assign you with a temporary tax code until you can get us your P45


What is your online portal and is it secure?

Our online portal is central to all our processes. When you finish your working week, you should log onto our portal and enter your timesheet details. This will then automatically send an invoice to your agency (or client) and a conformation email to you. You can also use the portal to submit your expense claims and view your payslips.

When you join Redego, you will be issued with a username and a temporary password. When you first log on to the portal, you will be asked to change your password to something memorable. No one at Redego has access to your password, but if you forget it, we can reset it.

To keep our portal secure, we use an SSL 128-bit encryption which is similar to that used in online banking


What happens if I want to leave Redego?

If you leave Redego, we will be sad to see you leave, but we will pay any outstanding holiday pay that you have accumulated and issue you with a P45 which you should give to your next employer.