Utilising a contingent workforce is a useful resourcing strategy, creating greater flexibility, cover for specialist skills and efficiency and reducing employee overhead costs. But such flexibility is piling the pressure on HR and the payroll system. Says Phil McDonald, Managing Director of Paraplus.

Of course, managing a flexible workforce is a challenging and demanding role for HR, and requires the ability to mitigate reputational risk, meet retention targets and comply with strict HMRC and legislative guidelines. This is especially significant considering that 26 percent of the average workforce now consists of temporary and contract workers, up from nine percent in 2009. However, partnering with a payroll umbrella can help to alleviate the challenges of managing a flexible workforce and improve HR performance.

Essentially, a payroll umbrella company is an organisation that partners with contract/temporary workers and end hirers or recruitment agencies. The umbrella company acts as the contract/ temporary worker’s employer across the range of assignments they may work on, processing their pay, expenses and tax through the PAYE system.

Managing a flexible workforce has its own set of complexities, due to the nature of temporary workers and contractors, who may regularly look for new projects and clients in search of further experience and potentially higher rates. Subsequently, an organisation’s retention levels can decline, increasing training and induction costs whilst lowering productivity. However, partnering with a payroll umbrella company allows workers to profit from an improved selection of benefits, including maximised income, comprehensive insurance cover and the advice of a personal advisor dedicated to that particular worker. These benefits can improve employee morale, ensuring a happier and more loyal workforce.

Additionally, if you’re employing a flexible workforce consisting of contract/temporary workers, this can pose a threat in terms of reputational and financial costs. For example, as an employer you are required to handle any disciplinary processes and administrate SSP, maternity and paternity contributions where applicable. For HR, this requires time, extensive expertise and administration to ensure the process runs smoothly. Conversely, using a payroll umbrella company allows your organisation to transfer the responsibility, reputational and financial cost of managing a flexible workforce, as the umbrella company becomes the overarching employer for your contract workforce. It’s a simple process that could save you time, costs and protect your organisation. A contingent workforce can also be quite time- consuming in terms of administrating the contract/temporary worker’s paperwork to comply with HMRC and legislative guidelines.

Failing to adhere to legislation could result in your organisation receiving financial penalties and potentially reputational damage, if these penalties receive negative publicity. Affiliating with an umbrella company allows you to minimise the risk of any compliance issues, as the umbrella company will administrate the worker’s pay, expenses and tax and ensure the worker is compliant with HMRC and legislative requirements. Subsequently, you will save time and reduce the strain on resources required to ensure a compliant, flexible workforce. Nevertheless, this is dependent on the selection of a payroll umbrella that you can confidently trust to provide reliable expertise. Therefore, it is essential that you understand how your umbrella provider operates in terms of compliance and transparency. Failing to select a compliant and transparent umbrella company could leave your organisation at risk of reputational damage, with your workers being exposed to HMRC penalties or poor advice. There are a many umbrella companies within the UK and yet only a small number of providers operate to strict guidelines in terms of conforming to HMRC and legislative guidelines. Therefore, before choosing your umbrella company provider, ensure a comprehensive tendering process to maximise your understanding of their operations.

In evaluation, managing a flexible workforce can be a difficult and time consuming task, however, with the help of a payroll umbrella company this challenge can be alleviated. An umbrella company can improve retention rates, reduce the cost of statutory payments and ensure you organisation is legislatively compliant. However, when choosing an umbrella company for your organisation, it is important that you conduct a comprehensive tendering process to ensure your provider operates in a compliant, ethical and transparent approach, protecting your company’s reputation.

Phil McDonald, Managing Director
Paraplus
www.umbrellaparaplus.co.uk