Employment Status Explained

If you’ve not come across the terms “Umbrella Company” “Locum” or “Pay As You Earn” until now, then I highly recommend you take a read of my articles under the United Kingdom section of this site. You’ll need know them to get what I’m going on about here.

Done that? Good.

Just like any other locum position in the UK, you’ll have the option to accept the contract under an Umbrella Company, Pay As You Earn (PAYE) via your recruitment agency, or PAYE via your Guernsey-based employer.

What about as a limited company I hear you ask? If you’ve read any of my previous articles you’ll know that I’m not a massive fan of this arrangement, and it will no longer be legal to operate in this way come April 2022 anyway, so I won’t be giving you any advice on that.

Instead, let’s discuss your three legitimate options so you can get the most out of those long hours you dedicate to bringing in the dough, and end up with more in your pocket at the end of each week.

Umbrella Company

You can certainly use an umbrella company as your employer to work in the Channel Islands, however, I couldn’t find any companies that were based in Jersey or Guernsey (perhaps a repercussion of all that dodgy off-shore trading?? Who knows).

If you elect to use your Umbrella Company what this means is you will effectively be paid as a UK-based employee by your UK-based employer and pay UK-based taxes. This could potentially be advantageous or disadvantageous depending on your individual financial circumstances.

However, you will need to ensure that your Umbrella Company is happy to employ you if you’re working outside the UK, as not all of them can.

Pro’s:

• Higher gross hourly pay rate at face value (although I always encourage you to calculate your net wage after deductions – what ends up in your hand is more important)
• You don’t pay Guernsey Social Security contributions
• Continuous employment by one business (even if you’re regularly changing jobs or recruitment agencies) can make your UK tax affairs simpler

Con’s:

• You won’t get to make the most of earning 90 days of wages tax free thanks to Guernsey’s non-resident tax rules
• Your umbrella company will charge you a weekly fee for payroll (usually around £15-25 per week)
• You will pay income tax on your Guernsey wages at UK tax rates (which jumps up to 40% if you earn more than £37,500 pa in England, Northern Ireland and Wales or more than £30,931 if you live in Scotland)
• You will pay National Insurance (NI) contributions in the UK on your Guernsey wages

Recruitment Agency PAYE

Being paid directly by your recruitment agency is another viable option to consider, but probably the least attractive option of the 3 in my opinion.

Pro’s:

• Simple to arrange. Just submit your weekly timesheet to your agency
• You won’t be paid a fee for your payroll

Con’s:

• Lower gross hourly pay rate at face value (but remember to calculate how much your end up with after all those deductions)
• You’ll pay tax and NI at the UK rate because your recruitment agency is a UK-based employer (therefore making you a UK-based employee)

Guernsey-based Employer PAYE

Finally, you can elect to go on the payroll as a temporary/casual employee of the end client who is recruiting you. This is an excellent option if you’re planning on staying 90 days or less.

Pro’s:

• As a Guernsey-based employee, if you’re non-resident you won’t pay income tax
• If you do become resident, you pay tax at the low flat Guernsey rate of 20%
• You don’t pay tax or NI in the UK (unless you’re a UK resident)
• You may be entitled to paid sick leave and annual leave (if this is part of your contract)
• You’re eligible for social security benefits (e.g. if you’re injured at work you can make a claim for public funds)
• You won’t pay a fee for payroll

Con’s:

• Because you’ll be taxed at source by your employer, you will still pay income tax to the Revenue Service which you will then need to claim back via a tax return in the next financial year. So the cash isn’t in your pocket for at least 12 months (think of this as forced savings – you’ll get a nice little bonus pay out next year!)
• You’ll pay Guernsey Social Security contributions, meaning 6.6% is deducted from your wages
• Payroll is usually monthly (I keep writing this as a con, but is it? Maybe it’s a good thing!)

There is no one size fits all here. Different arrangements will suit different individuals, you just need to work out which pro’s and con’s are most important to you and make your decision based on your own circumstances.

Good luck!

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