Here’s a selection of our contractors’ most frequently asked questions for your peace of mind.

We think we’ve covered everything you need to know, but if you can’t find the answer you’re looking for, our experts are on hand to help.

Call +44 (0)20 7078 0212 or email [email protected].

Am I self-employed or employed?

When working through an umbrella company, the umbrella technically employs you, and you work as a PAYE employee. As such, a reputable and compliant umbrella would also offer you employment rights and protection.

Do I have to raise my own invoicing?

No, as we are the company that provides your service to our client i.e. your agency, we will take care of invoicing so you don’t have to.

How often do I have to give you timesheets?

Depending on the policy of your agency, you’re normally required to give us timesheets as per your payroll frequency. Your contractor PA will confirm the exact procedure with you once you have signed up with us.

Can I get paid via dividends from the umbrella company?

As you are an employee of the umbrella company, you will only receive your remuneration in the form of employment income (wages), subject to PAYE and NIC deductions. This should be the same procedure for all compliant umbrella service providers.

Contractors should consider the legitimacy and compliance of umbrella providers that pay out remuneration in forms other than salary and wages.

What would Cloud9 pay me and what has been deducted from my pay?

From the funds we receive from your agency, we will:

  1. Make provisions for your employment costs, for example our admin margin, Employers’ NI and pension auto-enrolment contributions (when applicable) relating to all payments that are to be made to you.
  2. Set aside provisions for your holiday pay and to reimburse your expenses.
  3. Pay you the remaining funds in the following forms:
    • Applicable National Minimum Wage (NMW) rate, for all hours actually worked on assignment and hours where you were eligible for any statutory payments such as SSP, SMP and SPP etc.
    • The remainder (if any) is paid as Discretionary Profit Sharing Bonus (DPSB).

Please note that both your salary at NMW, statutory payments and DPSB are subject to PAYE and NIC deductions, we will deduct the amounts due to HMRC and transfer the NET payment to you.

Each pay period, we will send you a payslip and a statement showing exactly what’s happened to the money you have generated and we have received.

What are Employers’ NICs and why didn’t I pay it as a permanent employee?

An employee is subject to Class 1 National Insurance, which is made up of contributions:

  • deducted from their pay (employee’s National Insurance)
  • paid by their employer (employer’s National Insurance at 13.8%).

That means, when you were a permanent employee, your employer already made the contribution on top of your salary. As a contractor, your rate has been uplifted to include this, so your payroll intermediary (such as an umbrella company) can, as your employer, deduct and pay it to HMRC.

How much will your margin actually cost me?

Our margin is set at £20.00 for weekly payroll and £75 for monthly payroll. The amount is taken out before we calculate your taxable income, which is why the net effect of the fee could be as low as £16.43 and £44.82 respectively. More information can be found on our website under ‘Margin’.

Can I choose my own payment frequency?

No – at Cloud9, we do not hold on to our contractors’ funds. We pay our contractors immediately, as per their agency’s pay interval.

How long do I have to wait for the bank to clear my funds?

Our faster payment service is available for all contractors, so your wages should reach you on the same day we pay it.

Do I get paid holiday?

Yes, you have the right to 5.6 weeks (28 days) per annum and you may take any accrued paid leave entitlement at any time (subject only to the requirements of any current client assignment).

In order to account for holiday pay, we will set aside a reserve fund from the fees we receive from your agency for the amount of holiday pay accrued in that pay period.

How do you calculate my holiday entitlement?

The holiday entitlement of 5.6 weeks is equivalent to 12.07% of hours worked over a year. The 12.07 per cent figure is 5.6 weeks’ holiday, divided by 46.4 weeks (being 52 weeks – 5.6 weeks). The 5.6 weeks are excluded from the calculation, as the worker would not be at work during those 5.6 weeks in order to accrue annual leave. So if someone works 10 hours, they are entitled to 72.6 minutes paid holiday (12.07/100 x 10 = 1.21 hours = 72.63 minutes).

What about public holidays?

Public holidays are counted as part of the statutory 5.6 weeks’ holiday entitlement as described above under the Working Time Regulations 1998 (as amended).

What if I’m unable to go to work due to sickness?

If you are absent from work for any reason, and the absence has not previously been authorised by us, you must inform Cloud9 and the end client as early as possible. Notification should be made by you (where possible) via telephone. Any absence not previously authorised must be properly explained and in the case of an absence of uncertain duration, you must keep us regularly informed of its expected duration.

If you are absent from work due to sickness or injury that continues for more than five working days (excluding weekends), you must provide us with a medical certificate from your doctor on the sixth day of sickness or injury. Thereafter, medical certificates must be provided to us on a weekly basis.

Am I entitled to Statutory Maternity Pay (SMP) / Statutory Paternity Pay (SPP)

As an employee of Cloud9, you are entitled to Statutory Maternity Pay / Statutory Paternity Pay providing you have met the statutory requirements.

Why can I claim expenses?

When you become our employee – with a view to contracting your services to agencies and/or clients – we’ll provide you with an overarching contract. This will enable HMRC to treat the location of each assignment as a ‘temporary workplace’.

If you attend a workplace for a period of continuous work that lasts no longer than 24 months, we can reimburse some of your employment-related expenses out of the income you have generated for the company.

What is the 24-month rule on expenses?

In a nutshell, HMRC considers a work place permanent if you have worked, or intend to work there, for over 24 months. If this is the case, you will not be eligible to claim travel and subsistence expenses. Once you are aware that your contract will exceed 24 months, you will need to stop claiming travel and subsistence at that point, not when you reach 24 months. The 24-month rule applies to all roles where you will spend over 40% of your working time.

How do I claim expenses?

You will need to complete your claims via our online portal and attach your receipts as supporting documents to your claim. Alternatively, if you are not able to attach the receipts, you can email them directly to our contractor PAs. Claims without receipts won’t be accepted, so it’s important to make sure you’re not submitting a claim without attaching your receipts or sending them to your PA first.

Why do I have to provide receipts when claiming expenses?

When it comes to expenses, it is our job to make sure you are claiming them correctly. We do this to protect your income; as well as ensuring full compliance with HMRC, preventing tax avoidance.
Providing your receipts, enables us to verify your expenses claim, whilst providing explanation if your expenses have been disallowed (if applicable).

When will expenses be disallowed?

  • If the expenses claimed are not solely, exclusively and necessary for your employment.
  • If we cannot verify the existence and / or legitimacy of your claim (e.g. expense claims that are not supported by receipts or relevant documents.)
  • When your work place is deemed to be permanent (e.g. you are caught by the 24-month rule or this is the only/final workplace under the employment of Cloud9).
  • If the expenses claimed push your taxable pay below the National Minimum Wage.

When would I have to submit my expenses claim?

You can input your expenses claim into our online portal. To help you keep on top of your claim, this can be carried out on a daily basis; however you only have to complete and submit them to us at the end of each payroll period. Your contractor PA will explain this to you based on your payroll frequency.

My agency is reimbursing my expenses, do I still have to put them onto your portal?

Agencies tend to have different procedures when dealing with billable expenses. As such, please contact your contractor PA if you have billable expenses – they will be able to assist you.

What is Auto-Enrolment?

From October 2012, every employer in the UK must automatically enrol workers into a workplace pension scheme. Workers must:

  • be between 22 and the state pension age
  • earn more than £10,000 a year
  • work in the UK.

Similar to employers’ NIC, your employer’s contribution to the pension will be treated as an employment cost. This will be deducted before we calculate your taxable income.

The Auto-enrolment staging date for Cloud9 umbrella is June 2017; therefore, we will not deduct the cost of the pension from the amount we receive from your agency until then.

Can I obtain childcare vouchers from Cloud9?

Yes, Cloud9 supports its employees by providing childcare vouchers through salary sacrifice. Employees under the basic tax rate band can receive up to £55 a week (or £243 a month), higher-rate taxpayers can receive up to £28 a week (or £124 a month) and employee’s subject to additional-tax rates can still receive up to £25 a week (or £110 a month).

Do I need to file a self-assessment tax return?

Cloud9 declares its employee payments under pay-as-you-earn tax (PAYE); which means all of your tax and NI will have been declared and deducted. As such you will not normally need to file a self-assessment tax return. There are however some exception to the rule, whereby you will have to:

  • You have an income over £100k
  • You have other income such as investment income, rental income and capital gain etc.
  • You are requested by HMRC to file a personal tax return.

Please do not hesitate to contact us or our sister company K&B Accountancy Group if you have any queries.

Do I have to pay your margin when I am not working?

No, our umbrella service is ‘pay as you go’; we will only deduct our margin when we have processed your pay. As a result, we do not charge a joining or leaving fee.

What is the different between umbrella and PSC?

An umbrella company acts as your employer, providing invoicing and payroll services to you as a contractor. You will be under pay-as-you-earn (PAYE) employment, and will not be responsible for the umbrella company’s administrative work.

It is most suitable for contractors who are on a short term contract and do not want the hassle of setting up a limited company, or those that don’t require the flexibility of tax planning – offered by a limited company.

On the other hand, setting-up a Personal Service Company (PSC) means that you own and are in control of your own limited company. You will be the director and fully responsible for its statutory obligations, admin and accounts.

Setting-up your own limited company offers greater flexibility when in comes to tax planning. However, while there could be more monetary rewards, there is also more to consider – legislations such as IR35 and pitfalls such as late filing penalties. Please refer to our Limited vs. Umbrella page for more information and some useful tips before considering switching from umbrella to limited.

What is IR35?

IR35 is a tax legislation to ensure the ‘off payroll’ workforce, working as disguised employees (or being deemed as an employee by HMRC) are paying tax and NIC, similar to those who are being employed full time.

Is Cloud9 IR35 compliant?

At Cloud9 we operate a pay-as-you-earn (PAYE) model based on the entire income of all of our contractors – all of which are paid and taxed as if they are employees. As such, IR35 is not relevant.

What is a Managed Service Company (MSC)?

MSC is defined by HMRC as “a person who carries on a business of promoting or facilitating the use of companies to provide the services of individuals”, which has been tackled by HMRC since 2007.

Is Cloud9 operating as a Managed Service Company (MSC)?

No we do not operate as a MSC. As stated by HMRC “In umbrella companies, workers are treated as employees of the umbrella company and all payments to workers are employment income… consequently the third condition is not met and the umbrella company does not meet the definition of a Managed Service Company.”

To provide extra assurance for our clients and contractors, we have been audited externally by Professional Passport and are affiliated with ASPCo to ensure that we are fully compliant.

What is the Apprentice Levy?

The Apprentice Levy is a 0.5% charge imposed by the government on all companies whose payroll exceeds £3million annually. The reason behind the levy is due to the government’s pledge to create 3 million new apprenticeships. The Apprenticeship levy is going to be paid by the employer in the same way that employer NI is being contributed.

Why do Agencies use Umbrella Companies?

By using a fully compliant umbrella company, the overheads, employment risk and administrative burdens is minimised for agencies and passed into the umbrella company.

Are there any other benefits I receive when joining Cloud9 Umbrella?

Alongside the statutory benefits including holiday and sick pay, Cloud9 Umbrella also offers a reward scheme, available for all Cloud9 clients. You can access a range of discounts from big brands over a variety of sectors including shopping, technology, experience days out and travel.

Will the recent public sector reforms regarding IR35 affect me?

If you were contracting in the public sector via limited company then there is a chance you may be inside IR35. In this case, you would need to find an umbrella company to continue your contract under or switch to the private sector. However, it should be noted that the public sector changes will also affect the private sector in the future.

I am new to contracting and am unsure about whether it’s something I would like to pursue – do I need to pay any termination fees?

With Cloud9 Umbrella, there are no sign up or termination fees so if you feel like contracting is not working out for you then you are free to leave.

I’m not sure whether I would be more suited to an umbrella company or a limited company?

At Cloud9 Umbrella, we want you to make the right choice – that’s why we offer an initial consultation to all contractors and freelancers to determine which umbrella model is right for you or if Limited is the best route. Call us now on 0207 078 0212 to get your FREE consultation.