Five Benefits of Working as an Umbrella Employee

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The employment landscape in the UK has changed dramatically in recent years. Since December 2019, the number of self-employed people in the UK has dropped from 5 million to 4.25 million in July 2022. Self-employed people now represent 13% of the labour market (down from 15.3% in 2019).

This is - in part - due to reforms to IR35 that came into effect in April 2021, with many opting to use an umbrella company instead. Using an umbrella company can suit the needs of a lot contractors, and there are many benefits to consider. Here are five of Parasol’s top picks.

1. 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 and are (for all intents and purposes) 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.

2. It PAYE-S to be protected

When you work with an umbrella company, you will effectively be viewed as an employee and your wages will be paid through PAYE. This means that you will get all of the benefits of being an employee, with the freedoms of being a contractor, giving you the best of both worlds.

A survey by The Freelancer & Contractor Services Association (FCSA) discovered that a staggering 76% of respondents (freelancers and contractors) currently do not have any method of providing sick pay, maternity/paternity leave, holiday, or redundancy pay.

One of the most critical aspects of umbrella companies is the access to these benefits. Of the near-900 participants surveyed, their most important consideration was access to statutory sick pay. By joining Parasol, you will have access to these benefits, giving you an extra layer of security.

3. Hassle-free contracting

Umbrella companies aim to make your business as easy to manage as possible. When you join, there’s no daily admin to agonise over – you can simply submit your timesheet each week and we’ll take care of the rest.

Your payslip will show a breakdown of the money you have earned and any deductions taken for tax. All deductions will be displayed on your statement and likely will not differ significantly from month to month.

Your wages will then be paid into your bank account. Knowing when and how much you will be paid couldn’t be simpler. This is the perfect option for busy contractors with little time to spare each day.

4. Pensions

In 2012, the government introduced a Pension Auto Enrolment Scheme to combat the population not saving for their retirement. If you are an employee of an organisation, you’re 22 and over (and below the state pension age), earn more than the £10,000 a year threshold and primarily work in the UK, then you will automatically be enrolled in the scheme.

If you are working under an umbrella employer, like Parasol, this means that you are an employee and you will automatically be enrolled in the scheme and will see this displayed on your payslip.

5. Flexibility of work

If you are unsure whether contracting is right for you, an umbrella company gives you an easy way of dipping your toe into the contracting world. There are no financial demands from running your own limited company and little to no paperwork involved. This is also an ideal solution if you work shorter contracts or are between permanent work.

In addition, choosing to operate under an umbrella brings a lot of freedom. This means that you could review your business and opt to switch to a limited company with ease.

Getting started: It’s easy as 1-2-3

If you are considering leaping contracting, Parasol is here to help. With over 20 years of experience providing an umbrella solution to contractors, our dedicated team are on hand to answer your questions and provide you with all the advice you need. Here’s what you need to do to get started:

  • Sign-up to My Parasol using the link we email you
  • That’s it - you’re under the umbrella of Parasol