atw: Re: Umbrella companies - long - maybe OT for you
- From: "Margaret Parker" <margp@xxxxxxxxxx>
- To: <austechwriter@xxxxxxxxxxxxx>
- Date: Thu, 9 Jun 2005 00:06:52 +1000
Thanks for the information Michael.
I'll check out The Consultants Exchange - haven't heard of them before.
I've found out a bit more since yesterday, which others may find of
interest, or be able to comment on.
An umbrella company seems to be a service company that will take on the
administrative side of one's contract for a modest fee.
As I understand it, I organise a contract with my employer independently,
including the rate.
The service company then issues a tax invoice to the employer each fortnight
or whenever (on advice from me), and on payment of that invoice, extracts
and pays away tax, GST, super, and workers comp, extracts their fortnightly
fee, and remits the remainder to me.
Essentially it is handing over the hassle of managing paperwork on a regular
basis to someone else without it costing an arm and a leg, although from the
reports I've had, it pays to keep a fairly close eye on what's going on.
The relationship with the admin services company is essentially the same as
the one you'd have with an agent who pays you, but they play no part in
sourcing jobs or negotiating with the employer - you're on your own there -
nor do they cover the risk of non-payment by the employer - if the employer
pays late, you get paid late.
They charge the employer nothing - the entire relationship is with you -
essentially this arrangement "cuts out the middle man", which is probably a
reasonable way to go if you already have a well established relationship
with your employer which looks like being an ongoing thing - as in a long
term contract, and you don't much like doing paperwork yourself.
You can negotiate a higher rate to come out of the percentage that would
have otherwise have been paid to the middle man, and the employer saves the
rest.
The relationship with the service company can be terminated at short notice
at any time without hassle.
The alternative is to get an ABN and handle the paperwork yourself -
invoices, quarterly BAS returns, regular GST and tax and super payments etc.
or set up a company and get an accountant to do the paperwork (for a
considerably higher price I daresay).
Freelance is a bit different - from what I understand the relationship with
them is tighter and more formal - last time I looked, I think the idea was
that you effectively became a partner in a partnership of many contractors,
used their standard contract form and paid a set percentage of your earnings
in exchange for administrative services as above. I think they also threw in
doing your tax at the end of the year. They also seemed to offer a lot of
additional services if you want them - not sure how much of a hard sell they
do on these. The impression I got was that this arrangement is probably
better for those whose circumstances (apart from the work) enable them to
take advantage of different tax rates.
All these options seem like a lot of work, and terribly unnecessary to me
just at the moment - I am feeling nostalgic for the "old days". I can still
remember a time when you got a job after seeing an ad in the paper and
organising a direct interview with an employer (no agents or service
companies or HR people required), got paid with a wad of cash in a little
envelope by the payroll people upstairs each fortnight (no blood sucking
banks with their extortionate fees required), and got a nice predictable pay
rise each year as you became more experienced or were promoted (no wheeling
and dealing required unless you wanted to rise higher quicker). I can even
remember working 7 hours 21 each day (pre-flexitime) and knocking off at
4.51 precisely each afternoon along with everyone else in the building
(public service). Ahhh, I even had time to have a life...
Someone will have to remind me of the drawbacks of the "good old days". I am
sure there must be something I'm forgetting.
Margaret
Two reputable companies of this type that I have heard of are:
The Consultants Exchange - CXC @ <http://www.cxc.com.au/>
Freelance @ <http://www.freelance.com.au/>
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