Traditional or Swedish Derogation umbrella company?

 

The contents of this article were created by Professional Passport:

What are the main differences between the two forms of umbrella company?
The traditional umbrella company - This model continues to work perfectly well where it can be shown that the worker is receiving equal pay.

The Swedish Derogation Model - This would be used where you are unable to show the worker is on equal pay and you therefore need to remove the worker from that measure. As a consequence there are some safeguards that have been built to protect the worker which we will look at.
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When should you consider putting candidates through a traditional umbrella structure?
> When your candidates pay is equal to or greater than that of a comparable employees.

When should you NOT consider putting a candidate through a traditional umbrella structure?
> When their rate is below £7.75.
> When they are on a temp to perm contract
> When they have no intention of carrying out multiple assignments

What is the main AWR risk associated with a traditional umbrella?
The main risk is where the workers pay falls below pay scale rates of the comparable worker's pay.
Where a worker is unable to claim expenses, and therefore cannot benefit from the additional tax relief, it is possible that their overall remuneration could fall below that of a comparator or pay scales for their role.

Another risk for recruitment agencies and umbrella companies is annual pay awards. Where a hirer operates across the board pay awards for its workers, the recruitment agency must also give the temporary worker an equivalent rise.
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When should you consider putting candidates through a Swedish Derogation umbrella structure?
> When no comparator data is available
> No pay scales are in operation
> Pay appears to be below that of the comparator
> Longer contracts of around 12 months (why? - It would commercially unsound to pay a temporary worker a minimum of 4 weeks pay once they complete a 3 month contract. It is much more cost effective to distribute this cost over a period of 12 months)

When should you NOT consider putting a candidate through a Swedish Derogation umbrella structure?
> When their rate is below £7.75.
> When they are on a temp to perm contract
> When they have no intention of carrying out multiple assignments

Complying with AWR using the Swedish Derogation Model

It is important that the temporary worker confirms that they are happy to be removed from the entitlement to equal pay. As compensation for this they will receive pay between assignments.

It is important to point out that even though the Swedish Derogation Model removes the need to meet comparable pay, all other rights under AWR must be complied with.

There are some expectations when pay between assignments is not required to be paid. These are:

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If the worker is not available for work
> When the worker resigns
> If the worker refuses acceptable work

Danbro are providing both traditional and Swedish Derogation models and can tailor a solution to the needs of the recruitment agency or end client. For more information, please call 0800 731 3178.