Choosing to contract through an umbrella company is a big move and isn't a decision that should be taken lightly. Contractors should look at the pros and cons of using an umbrella provider and do thorough research before making the move to umbrella. After all, this can have a significant impact on your day-to-day life, impacting the way you are paid, your workload of paperwork and admin, and whether you receive statutory benefits and insurance.
To help, Umbrella Search has put together this guide outlining everything contractors need to consider before signing up with an umbrella company.
1. How does IR35 work with an umbrella company?
We know that IR35 is something that every contractor is cautious of. After all, being IR35 compliant is key in order to avoid huge fines, as well as stressful legal issues.
That's why it's important to know where you stand when it comes to IR35.
The great news is that when you work with an umbrella company, you won't need to worry about IR35. This is due to the fact that the umbrella company becomes your employer and pays you through their payroll, leaving no questions over your employment status.
In fact, this is one of the factors that attract a lot of contractors to using the umbrella company route, as well as the breadth of over benefits which you can read about here.
2. Will you pay a fee to use an umbrella company?
Before signing up with an umbrella company, it's important that contractors consider umbrella company fees and how much this will set you back.
Every umbrella company charges fees in exchange the range of services and benefits they provide the contractor with. How much you will pay in umbrella fees will depend on the company and whether you require additional services; however, the great news is that contractors can expect to pay from around £15 per week for the umbrella company, making it very affordable.
3. How and when will you get paid through an umbrella company?
Understanding how and when you will be paid is key for managing your finances. After all, you work hard on the contract at hand, so you'll inevitably want to know how you will receive your pay.
The great news is that an umbrella company makes getting paid super easy. The umbrella company will put the contractor on their payroll. That means that the contractor's pay has the correct amounts of tax and National Insurance deducted from it before it lands in your pocket.
That means that contractors don't have to worry about things like tricky tax returns and working how much you owe in tax through a self assessment. It also means there's no need to worry about saving enough for upcoming tax bills as all of this is taken care of.
In terms of how often you are paid, umbrella companies typically do several payment runs, meaning you can get paid weekly, fortnightly or monthly. Some umbrella companies will also offer same day payments which may come at an additional charge.
4. Can you claim expenses?
Contractors that operate through a limited company may have the responsibility of running their own business and dealing with all aspects of finance and taxes, however, they do benefit from being able to claim back legitimate business expenses.
The great news is that umbrella company contractors can do the same. Even though they are employees, contractors that work through an umbrella company are able to claim back expenses such as those incurred through mileage, accommodation and travel when working away, as well as equipment and training.
These expenses can be offset on your tax bill, reducing your tax liability. What's more, these contractors can simply inform the umbrella company of their expenses and they will take care of the rest.
5. What about contractor insurance?
Every contract must have certain types of insurance in order to carry out the work at hand. This is because they usually work with clients, the public, or colleagues in a number of different settings and sometimes on site, so they must be fully insured for every instance.
Another great benefit of using an umbrella company is that professional indemnity, public liability and employer's liability insurance are usually covered in the cost of the umbrella company fees. This not only saves you from forking out for these yourself, it also means one less thing to worry about and organise. You can be safe in the knowledge that you're covered should the worst happen.
6. Are there additional benefits on offer?
If all of that doesn't sound tempting enough, contractors will be pleased to learn that umbrella companies usually offer a range of further benefits. These can include things like same day payments, help with pensions, additional levels of insurance such as healthcare, and guidance on things like childcare tax credits.
These additional perks can help to make your life as a contractor much easier and take some stress off your plate.
7. Is it easy to exit an umbrella company if I decide it's not for me?
Contractors can easily leave an umbrella company should you decide that you wish to rejoin full time employment or want to set up a limited company instead. Contractors aren't tied into a contract with the umbrella company, making it a great option even if you're only planning on contracting for a short period.
Think an umbrella company is the right option for you?
Let Umbrella Search help
Now that you know everything you need to consider before using an umbrella company, you might have decided to join the thousands of others who are using an umbrella provider. If that's the case, we're here to help.
Just get in touch with the Umbrella Search team today and we'll help you take the first steps to finding the best umbrella company for you.
Which industry are you contracting in?
IT & Tech
Finance
Medical
Other
Comments