Is an umbrella company right for you?
Wage porting (also known as an umbrella company) allows a person to propose his workforce or to test his ability to undertake, without actually creating a real business.
Summary
- The Basics of wage porting
- Wage-porting companies
- The status of the employee brought
- Client companies
1- The Basics of wage porting
A person (usually a consultant) performs a service for a client. The client then pays the fees billed to him to a porting company, which transfers them to the consultant in the form of a salary, after deducting social security contributions (employer and employee) and a commission.
This porting operation is characterized by a triangular operation.
- A service contract signed between the consultant, the portage company and the client. This functions just like any contract, and it must mention the nature of the service to be performed, the start and end dates of the assignment, and the terms of payment.
- A contract of employment between the consultant and the portage company. It is established at the same time as the previous contract.
- An agreement of adhesion can also be signed between the parties involved to define how fees are billed, as well as any ancillary services proposed by the companies of portage.
In practice, depending on the situation, the use of wage porting can either be occasional and only involve a specific task, or take place in an extended period of time in the context of recurrent missions.
2- Wage-porting companies
What they do
Portage companies generally only accept service missions, and only those that fall in their area of responsibility. The most frequent activities are expertise and consulting missions in various fields such as human resources, quality, marketing, finance, communication, etc.
These companies earn money by deducting from the services invoiced a commission corresponding to the management fees incurred. This fee usually goes from 5% to 15%. Some structures also have a system where fees diminish as the turnover achieved by the consultant grows, and an annualized system, the scale again varying according to the turnover achieved each year.
It is advisable for a consultant to only choose the porting company with which he will work:
- After having the terms of payment of wages clarified: some structures pre-finance wages and take the risk of unpaid bills
- After having the methods of calculating commissions explained
- After taking into account the ancillary services offered by these companies to the consultants: recovery of fees not collected, business cards, switchboard, typing of documents, training, support for commercial negotiation, etc.
Most of these structures organize information meetings, during which any interested parties can find the answer to these questions.
Their obligations
They have to make a declaration to the Labor Inspectorate before anything.
This declaration must contain the following pieces of information:
- A clear indication of the proposed transaction: creation of a wage-carrying company, opening of a branch, an agency or a subsidiary office, relocation of the head office or cessation of activity, etc.
- The name, registered office and legal status of the company and, if applicable, the location of the branch, agency or subsidiary office,
- The date of effect of the proposed transaction,
- The name, first names, domicile and nationality of the managers of the company, of the branch, of the agency or of the subsidiary office,
- A designation of the body to which the porting company pays the social security contributions, as well as its employer number,
- The geographical and professional fields in which the company intends to “port” its employees,
- The number of permanent employees that the company employs, or plans to employ, in order to operate its own services.
This declaration, dated and signed by the representative of the company must be sent in two copies, by registered letter with acknowledgment of receipt, to the labor inspectorate responsible for the company’s headquarters, branch, agency or the annex office.
The latter ensures compliance with the declaration and returns a copy to the company within 15 days.
The activity can only begin after the inspectorate has received the document, or after 15 days.
- Their activity must be exclusively dedicated to wage porting and they must be listed under the same specific NAF code (this NAF code is to be created).
- Only a wage-porting company can make wage-porting employment contracts.
- They are not required to provide work to the employee ported.
- The wage-porting companies have to make a fixed-term or indefinite employment contract with the salaried employee, and to complete the necessary paperwork and the necessary social declarations for such a contract.
- Working time is determined in the employment contract, and it may either be a fixed-hour contract or an annual flat-rate agreement in days.
- the total duration of the fixed-term contract may not exceed eighteen months taking into account renewals (if applicable).
- In the case of a contract of indefinite duration, periods when no service to a client company is rendered are not remunerated.
- For each porting service, an amendment to the contract of indefinite duration containing the essential elements of the initial modified contract must be made. It must include each new service, such as the modalities of realization, the duration of the service, the working time and the amount of the remuneration.
- Wage-porting companies have to accompany the ported Employee in order to allow them to perform their services.
- They must set up and manage an activity account for each employee ported, and they have to keep them informed of any and all elements changed on this account,
- On behalf of the employee, the companies have to subscribe an insurance guaranteeing professional and civil liability for damages that the ported employee could cause the customer during the performance of his service.
- They must also take out a financial guarantee from an authorized institution in order to guarantee the payment of sums due to the ported employee, as well as the payment of social security contributions if the employer ever fails to pay the employee.
It is calculated according to the annual payroll. It has to be at least equal 10% of the payroll of the previous year, and it has to be superior to 2 times the Annual Social Security Ceiling.
Legal sanctions
The employee that is ported can be sanctioned with a fine of € 3,750 (6 months in prison and € 7,500 if it happens again) in case of:
- failure to comply with the legal conditions surrounding the performance of the activity (exercise on an exclusive basis, activity account per employee carried, subscription of a financial guarantee, prior declaration of activity, etc.)
- conclusion of a portage contract that doesn’t respect the law (fixed-term contract with no specific term or minimum duration or disregarding the maximum periods, etc.).
- lack of a commercial contract 2 days after the beginning of the service.
On top of this fine, they may also be banned from performing their services from 2 to 10 years
3- The status of the ported employee
Ported Employees
- They have an expertise, a qualification and an autonomy that allow them to seek out their customers themselves and to agree with them the conditions of performance of their service and their price.
- Their income (paid and paid leave) that cannot be lower than 77% of the monthly value of the Social Security Ceiling for a full-time activity.
- They may be entitled to a compensation of 5% of their remuneration.
- they have to guarantee the safety of their clients and negotiate the price of the service to be performed directly with them. They are also legally obligated to give the porting company every element making the contract possible, as well as the payslip and the activity reports,
- They are required to report their activity to the porting company by sending it a report of activity in order to update the activity account managed by the porting company.
The situation in regards to the Assedic (Association for Employment in Industry and Commerce):
The ported Employee is considered to be an employee of the wage-porting Company.
Since 1 January 2015, the ported employees are no longer presumed to always receive a payslip.
As such, the Unedic, allowed jobseekers to temporarily not have to provide proof of an employment contract, until legislation organized the activity of a ported employee.
4- Client companies
Their obligations towards ported employees:
- They can only use the salary portage:
- for occasional tasks not related to their normal and permanent activity,
- for a specific task requiring expertise that they do not have internally.
- They negotiate directly with the ported employees the conditions and the price with which the service is realized.
- The duration of each service performed with the ported employee must not exceed 3 years.
- Exemptions to this duration are possible if it’s to allow the employee to acquire the number of quarters necessary to receive a full pension.
Their obligations towards the portage company:
- They have to pay the wage-portage company the price of the service agreed with the employee on the dates stipulated in the contract.
- They have to keep the wage-portage company informed of any event that could have an impact on the length of the service.
Legal sanctions
- The client company that resorts to wage-porting outside the legal framework or cases provided for by the law is liable to a fine of € 3,750.
