All the answers to the questions that a Procurement Manager may ask about wage portage from the business’s viewpoint.
Yes. It is unusual for an umbrella company to be listed as a supplier. It cannot be considered that there is a professional culture or an adequate reference framework in this field because wage portage is a newcomer in terms of human resources accompanied by recent regulation.
So it is essential to devise an appropriate strategy for this specific listing as a supplier, which cannot involve the transposition of an existing process in view of the legal specificities of wage portage.
Here are the essential components of a supplier listing strategy appropriate for wage portage:
One cannot say, leaving aside any marketing argumentation, that umbrella companies all do the same job in the same way. Portage is an emerging market with a very low cost of entry and in an environment that has been, until now, poorly defined.
More than ever before in this field, for any company wishing to be listed as a supplier, the word portage is not enough to define the service rendered.
The costs of a consultant via wage portage break down into pay, allowance for searching for clients, travel expenses and management costs. The pay must include, as it would for any employee, not only the days of production, but a ratio of time between assignments, as well as time for prospecting clients and for the consultant to undergo training. All of this is usually boiled down to a price per day excluding tax.
To optimise the cost of portage, it is necessary to incorporate that the longer the assignment, and the more the daily price falls because prospecting time is reduced, the break between assignments reduces and the amortisation period for the training grows.
One can say that for a full-time equivalent in the course of a year, the cost of a consultant using wage portage is close to that of an in-house employee with the same skills because the impact of management expenses is not higher than the expenses incurred by the company to manage its own employees.
So it is more attractive to anticipate and group assignments together, or even use the same consultant for several units or departments in the same company.
As a priority, the umbrella company must have its legal identification data: the ‘extrait K bis’ (certificate of incorporation), the legal information.
The dossier must contain precise identification of the legal entity chosen by the umbrella company to carry out the consultant’s wage portage.
Moreover, the client company must request the umbrella company to provide a certificate of professional civil liability insurance (RCP). This insurance is essential because it covers the client company in the event of any loss caused by a consultant (At ITG, for example, this insurance covers 800 000 € of losses per assignment).
The client company also has to supply documents certifying that it provides a financial guarantee, also known as ‘collateral security’. It reflects the umbrella company’s ability to pay the agreed salary every month at the request of the consultant before the umbrella company receives payment of its invoice for the consultant’s services.
If the client company has training consultants, the umbrella company must supply documents certifying that it has an approval number for those consultants carrying out training.
The aim of a procurement department is not only to safeguard the company’s supply chain but it also wishes to increase its competitiveness by reducing the cost of its purchases.
In this context, how to interpret the attractiveness of an umbrella company’s offering?
Most importantly, don’t just settle for looking at the apparent management percentage, which may just be window-dressing, a sort of illusion that conceals the dubious practices of some companies.
Wage portage has quickly become a low-cost service, with gross margins of less than 10% of turnover. These rates are even lower if you compare them with the average for companies managing the same package of services (HR and payroll + training + legal + insurance + invoicing, collection + management and accounts) and which often do that for a cost of somewhere between 11 and 13.5% of turnover. (Source: exploitation of data from the balance sheet centre of the French Central Bank).
Three strategies are open to an umbrella company for its development :
ITG has chosen the latter solution, which we can illustrate in very practical terms. An unwary observer might be tempted to just accept the headline percentage declared by candidate companies. The reduction in this cost factor should, a priori, bring down the amount of fees invoiced.
In practice, the reality is quite different, because the fees invoiced depend on several cost factors, and whose management rate is far lower (in particular, see our answer to the question ‘How to optimize the cost of portage’).
Other vital parameters should be examined when deciding whether to list a supplier.
Besides the classic data on the financial soundness of the company and its offering, it is essential :
To summarise, to make your choice and list an umbrella company for the long term, three levels of investigation should be used, in order of importance :
Yes, and in some cases it is even obligatory.
Below a turnover level of 70 000 € (of which 33 200 are below the VAT registration threshold), it is possible for businesses to use the services of a sole trader, but this entails two major risks. If the sole trader works regularly for a company, there is a risk that the relationship will be reclassified as an employment contract.
The courts regularly rule that contracts should be reclassified, which has two consequences :
In an assignment where the fees may exceed the threshold, the self-employed person can no longer use the regime applicable to sole traders. Then wage portage is available as the most credible alternative.
Finally, another solution is possible: combining two regimes.
The legislator has not prohibited combining work as a sole trader and working via an umbrella company. That is why you can ask a sole trader to work via an umbrella company in the context of the assignment for your company. He/she can remain a sole trader for different assignments or for lower amounts.
In the context of the assignment with your company, unlike a sole trader, wage portage will enable the consultant to pay pension contributions and obtain social insurance for unemployment and social security.
The buyer should not focus only on the percentages, but also consider overall income. Several factors enable companies to stand out from the rest by giving their consultants an increased overall income, either by cutting certain cost factors, or by paying additional benefits negotiated in company agreements.
That is the case of ITG which provides its consultants with :
These various arrangements enable a consultant to increase his/her income by 4%, for an example where the annual fees are 60 000€.
Beyond the existing legal norms, your company can adopt a sustainable purchasing policy.
This requirement policy, which is becoming more widespread in the business world, aims to ensure that supplier’s practices are consistent with the company’s sustainable development policy.
The sustainable aspect of purchases covers the environmental and societal aspects. The objective is to control the risk connected with suppliers (image risk) and can also be an opportunity to communicate with customers.
Three-quarters of large companies incorporate sustainable development criteria in the selection of their suppliers, and sustainable purchases are also becoming an important issue for SMEs (see particularly).
At ITG, there are several factors that enable us to offer responsible wage portage :