How exactly does an umbrella company work? Umbrella companies employ those who are on a fixed-term contract. Putting it simply, your agency will pay an umbrella company, which then pays you through something called PAYE (pay-as-you-earn).
Umbrella companies will treat you as if you’re a full-time employee. Ultimately, it’s a company that self-employed contractors can join.
Once you’ve found the perfect umbrella company, they’ll typically sign an agreement with your agency. A contract is usually signed by yourself and your chosen company, which will then mean you are classed as an employee under their name.
Umbrella companies will always take care of the complicated things like taxes, national insurance contributions and other various deductions that are required by law.
Similar to regular agency jobs, you will get a payslip and reconciliation sheet, which will include details about your wage.
Umbrella Companies: What to Expect
Running a limited company can definitely prove to be difficult at times. It’s always an advantage if you can find someone to take care of admin tasks, but that’s exactly what umbrella companies do.
Umbrella companies will be fully responsible for administrative tasks, which can undoubtedly be one of the harder parts when it comes to business.
VAT returns, company records and payroll are all examples of tasks that an umbrella company can handle. Contractor umbrella companies have been around for almost 20 years, and before they ever existed, most freelancers would usually work through their own limited company.
Now, 20 years on, it’s believed that there are over 400,000 contractors and freelancers in the UK that are paid through umbrella companies. The number rose significantly when changes to the off-payroll within the public sector came into effect in April 2017.
If your chosen umbrella company is FCSA accredited, then there’s no doubt they can demonstrate the highest industry standard. Accreditation is rewarded to various umbrella employers, contract providers and those who are self-employed.
Additional Benefits of Using an Umbrella Company
If limited company contracting isn’t an option and your agency or end client prefers to outsource their payroll, then using an umbrella company could be a great route to go down.
The beauty of an umbrella company is that there’s zero commitment. You’ll be glad to know that you don’t need to worry about signing any long contracts. It’s no surprise that it can be a tedious, struggle sometimes when trying to get out of contracts.
Umbrella companies are great if you change your mind about things and want to go back to regular employment at the end of your contract.
There are so many great benefits when it comes to using umbrella companies, but what are some other added bonuses?
Some, but not all, umbrella companies provide additional employee benefits. Payslips are always sent out to those who are working under an umbrella company, but some choose to go that extra mile.
Statuary sick pay, holiday, maternity and paternity pay are all on the list of added bonuses when you’re an employee at an umbrella company.
If you didn’t think that was enough, some companies’ also offer professional liability insurance, which makes you feel even more comfortable within the workplace.
Choosing A Reputable Umbrella Company
Umbrella comparison sites and directories can definitely come in handy if you’re looking for that perfect company that will meet your needs.
Endorsements are a great source of information when you want to find out a little bit more about some companies. Fellow professionals always have a good inkling of what company could be beneficial to work for and where not.
Looking out for accreditations can help certify your decisions. Accredited memberships are rewarded to providers who have been audited by high industry experts.
Do your research when it comes to fees. Whether it’s a fixed fee or percentage fee, make sure to check everything in great detail when you manage to find an umbrella company.
Look out for signing up fees and early exit fees. Remember not to hesitate when it comes to asking about any suspicious same-day fees as well.
Don’t worry about feeling pressured to only choose an umbrella company that has great endorsements and reviews.
If you genuinely feel that another company meets your needs more specifically than the rest and is somewhere you’d prefer to work, then make sure to go for whichever seems to suit you best.