What is an Umbrella company?

2 May 2023

Umbrella is a simple and easy way to work.

We understand that if you’ve never heard of Umbrella contracting before, this way of working may seem confusing. So, before you begin, you may want to learn a bit more about what’s involved.

What is an Umbrella company?

Working as an Umbrella employee is a straightforward and simple way to enjoy contracting. An Umbrella company employs you and enables you to enjoy the flexibility of contracting, without the hassle.

It involves becoming an employee of an Umbrella company which then supplies your services as its employee to other companies (the employment agencies or end hirers).

You can operate one contract at a time or switch seamlessly between multiple contracts whilst building a record of continuous employment. This can be invaluable when seeking a mortgage or other types of loan.

There are a number of other employment benefits that you’re entitled to as an Umbrella employee, including holiday pay, statutory payments for maternity/paternity/adoption, and sick leave, as well as access to a company pension scheme, and a wide range of insurance covers as standard.

As an Umbrella contractor, you will pay Income Tax and make National Insurance contributions on all your income at source, just like any employee would.

This could mean that you’ll receive slightly less take-home pay than if you were a limited company contractor operating outside IR35. However, you’ll receive all of the usual benefits of employment, some of which you might not have through your own business, plus a great employee benefits scheme and none of the admin involved with running your own business.

The Benefits

  • Simple set-up
    It’s really easy to get set up as an Umbrella employee. You can register with us and start working straight away. The whole process takes only a few minutes.
  • Correct tax
    We will work out your Income Tax and National Insurance so you don’t need to worry if you’ve made the correct payments. These will be deducted directly from your pay.
  • Employee rights
    As an Umbrella employee, you’re entitled to full employment rights whilst retaining the flexibility to switch between contracts, giving you peace of mind.
  • Holiday pay
    Umbrella employees are able to accrue holiday pay. You can also take paid maternity/paternity and adoption leave.
  • Pension scheme
    You can save for your future by joining our employment pension scheme or continuing to pay into your private pension or SIPP. Plus, we can provide you with personal accident insurance.
  • Long-term employment
    Umbrella employees are able to build a continuous record of employment which is helpful when applying for mortgages and other types of loan.
  • Insurance cover
    Wide range of insurance provided as standard, including public liability, employers’ liability, and professional indemnity.

 

Your Options

We understand that choosing the correct working option can be complicated. You have a range of options to consider before making a decision, such as Agency PAYE or operating through your own limited company. Here we show you how the options compare.

 

Workwell Umbrella

  • Security of payment – we are your employer and responsible for ensuring you get paid.
  • Continuous employment – as an Umbrella employee you can seamlessly switch between contracts. This provides you with one continuous tax code, saving you admin when switching assignments and allowing you to build a record of continuous employment.
  • Income – as an employee, National Insurance and income tax will be deducted from your take-home pay, so it’s a simple way to remain compliant.

 

Agency PAYE

  • Security of payment – you might not be entitled to any form of protection depending on how you are engaged. So, if the end client refuses to make a payment, you might lose out on pay.
  • Continuous employment – if you choose PAYE you will have to switch to another agency’s payroll if you take on another contract offered by a different agency, meaning there may be gaps in your employment record and more admin responsibilities
  • Income – not all agencies operate their own payroll. But, if they do, you will likely be classed either as an employee or a worker of the agency. This means National Insurance and Income Tax will be deducted from your take-home pay. it’s a simple way to remain compliant.

 

Limited company

  • Security of payment – You are not protected from non-payment because you are your own employer. You may need to invest in various forms of insurance to guarantee you are protected if your end client decides not to pay or is unsatisfied with your delivery.
  • Continuous employment – You could experience long breaks between assignments where you won’t be receiving an income. This can make it more difficult to apply for mortgages and loans as your income stream is less reliable.
  • Income – When working through your own company, assuming you are working outside IR35, you can pay yourself through a combination of dividends and salary, meaning you can maximise your take-home pay. You will, however, have to submit a self-assessment tax return at the end of the year.

 

If you have any questions about any aspect of Umbrella employment, please speak to our expert team on 01923 257257 or email [email protected].

 

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