The Benefits of Using an Umbrella Company

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The employment landscape in the UK has changed dramatically in recent years. There are now more than 5 million people self-employed in the UK (up from 3.2 million in 2000) and self-employed people now represent 15.3% of the labour market (up from 12% in 2000).

With upcoming reform to IR35 due to come into effect in April 2021, many offering their services through a limited company are worried about what impact these changes might have and some are choosing to become umbrella employees instead.

So, what exactly are the benefits of an umbrella company? In this article, we will explore what an umbrella company is, what are the benefits for you and how you can make the first steps in joining an umbrella company.

What exactly is an umbrella company?

An umbrella company is an employer of contractors working on temporary assignments. Rather than setting yourself up as a sole trader or limited company, you will be paid by an umbrella company as their employee. You get the benefits and protections of being an employee, with the flexibility of being a contractor.

Like an umbrella shielding you from the wind and the rain, an umbrella company shields you from long forms, admin and the general bureaucracy of being self-employed. 

It PAYE-S to be protected

As an employee of the umbrella company, your income will be subject to PAYE deductions and you will receive all the protections a regular employee would. This includes maternity/paternity leave, redundancy pay, sick pay and holidays. 

One recent and unexpected benefit of being PAYE protected was the UK Government's Job Retention Scheme - more commonly known as furlough.

Find out more about how Parasol has committed to helping their contractors.

A simple way to get started

Umbrella companies are great for those new to contracting. There are no complex steps of setting up a limited company or any worries of being caught up in the IR35 legislation (more on that later). You could be up and running in a matter of minutes. 

If you are unsure whether contracting is right for you, an umbrella company gives you an easy way of dipping your toe in the contracting world. You could consider setting up a limited company later if you choose and its right for your circumstances.

Avoid being caught up in IR35

IR35 is a piece of anti-tax-avoidance legislation introduced to the UK in April 2000. It essentially looks to tax what is known as disguised employment. It applies to contractors who work through their own limited company who are (for all intents and purposes) actually in an employment relationship with the firm they are contracting for.

The great news is by becoming an umbrella employee, you don’t have to worry about being inside or outside IR35. There is no ambiguity, you are simply an employee of Parasol in the eyes of the law and for tax purposes.

Hassle-free contracting

One reason why umbrella companies are so popular is that they are hassle-free. As an employee of Parasol, all you need to do is log onto My Parasol, upload your timesheets and we’ll do the rest. 

The rate agreed for the assignment will be invoiced by Parasol and we will take care of the employers National Insurance and apprentice levy from this assignment rate. Your tax and National Insurance will be deducted before you are paid, and you will receive your net pay in your account. There’s no end of tax year scramble. Gone are the days of looking through old bits of paper.

Getting started: It’s easy as 1-2-3

Using an umbrella company is perfect for those starting their contracting careers and for those who just want a simpler way of life. Parasol is with you all the way and here to help guide you through the complexities of contracting. Here’s what you need to do to get started: 

  1. Request a call back from a member of our team by clicking the button below 
  2. Sign-up to My Parasol using the link we email you 
  3. That’s it - you are under the umbrella of Parasol