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.
Using an umbrella company can suit the needs of many contractors, and there are lots of 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 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.
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 recent survey conducted 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 important 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 via MyParasol 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 of the deductions will be clearly displayed on your statement and likely will not differ greatly from month to month.
Your wages will then be paid into your bank account. Knowing when and how much you are going to be paid couldn’t be simpler. This is the perfect option for busy contractors with little time to spare each day.
4. Claiming business expenses
As an umbrella employee, depending on the assignment you may be able to claim back on certain expenses. Parasol will manage a log of this on your behalf, which means you could enjoy more of your hard-earned money from your assignments.
Claiming back your expenses is easy; you will just need to log them in MyParasol, and we’ll do the rest. You can find more information about business expenses by reading our handy guide.
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 in the contracting world. There are no financial demands from running your own limited company and there is little to no paperwork involved. This is also an ideal solution if you are working shorter contracts or are in 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 making the leap into 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 of the advice you need. Here’s what you need to do to get started:
- Request a call back from a member of our team by clicking the button below
- Sign-up to My Parasol using the link we email you
- That’s it - you’re under the umbrella of Parasol