Why umbrella companies aren’t dead

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Parasol founder Derek Kelly explains why there's still life in umbrella companies after the government’s latest Travel and Subsistence (T&S) expense legislation changes

For months now, so-called “industry experts” have predicted the death of umbrella companies. They claimed that providers wouldn’t be able to cope with the demands of the new legislation, or that it spells the end of contractors claiming any kind of expenses therefore spelling the end of the umbrella.

Call me biased if you like but I believe the doom mongers couldn’t be further from the truth.  In fact, the new regime might even make compliant umbrella companies a more attractive option for recruiters and contractors alike.

Each new piece of legislation passed by the government creates yet more administration for agencies to contend with. This not only costs money, but also diverts their attention from what they do best. That’s not all, as recruiters will also have to carry the can if they make a mistake – risking hefty fines and reputation damage.

By working with compliant umbrella companies, such as Parasol, agencies can pass on all of this additional risk and responsibility.

Another reason why umbrellas won’t disappear is that they’re old hands at dealing with change. Whether it’s auto-enrolment, real time information or the Agency Workers Regulations (AWR), we’ve always been able to adapt our offering to stay compliant with the rules and still provide vital support for contractors and recruiters. T&S is no exception.

This level of adaptability means that agencies can trust umbrella companies to look after their contractors, safe in the knowledge that all necessary obligations are taken care of. For contractors themselves, it means they can be sure they’ll be whiter than white at all times, so they can get on with their assignments.

Reason number three is that contrary to what some people believe (perhaps even within the government), umbrella companies don’t just exist as a method to provide tax relief to contractors.

For recruiters, umbrella companies act as a shield that protects them from employment risk and unnecessary burden. Contractors also benefit in a number of different ways.

Umbrella companies act as the perfect bridge between contracting and permanent employment, making them ideal for those new to the profession. That’s because they provide contractors with the best of both worlds.

Not only do they let the workers enjoy all the perks contracting can bring, they also provide them with the same employment rights and benefits they’d get as a permanent employee. In addition, umbrella companies reduce all the administration associated with being a contractor.

Umbrellas will take care of tax and National Insurance Contributions, while making sure that contractors receive a guaranteed minimum wage. We also help contingent workers progress in their careers, so they can grow to become limited companies and beyond. Contractors will also still be able to claim legitimate business expenses in the future, there will just likely be a few more questions to ask to check this is ok, again more admin for the Umbrella rather than the recruiter to take care of!

Of course if a contractor feels an umbrella company isn’t right for them they may want to look at the PSC option but only if this is right for their circumstances. Through our ClearSky Contractor Accounting offering we have that angle covered for recruiters to offer as well.

So does T&S spell the end of umbrella companies? Absolutely not! We’ve been there from the beginning, we’re here now, and we’ll continue to be with contractors and recruiters all the way – no matter what happens.