What exactly is an umbrella company?

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Umbrella companies give contractors the freedom they desire, whilst providing them with the perks which come with employment. There’s a lot of information out there that explains what an umbrella company does. But you may be asking, what exactly is an umbrella company?

Well, what is an umbrella company?

An umbrella company employs contractors working on temporary assignments (commonly known as contracts). Joining a compliant umbrella company gives you the chance to enjoy increased flexibility, whilst taking advantage of the rights and benefits a permanent employee would typically receive.

The rise of the umbrella company

Umbrella companies grew in popularity in the early 2000s, in line with the introduction of IR35 given you can can’t be caught by IR35 when working for an umbrella company. With the rise of self-employment over the past decade, they’ve enjoyed increased growth and popularity. This isn’t a surprise to us, as they’re the perfect solution for those taking their first steps into contracting or are contracting for a short period of time.

So if you’re a contractor and this appeals to you, one of your options is to become an employee of a compliant umbrella company.

So, what’s the process?

  1. Choose an umbrella company and check their compliance credentials
  2. You are then provided with a contract of employment
  3. Send copies of your timesheet and expenses to the umbrella company
  4. The umbrella company invoices the agency for your hours worked
  5. The agency pays the umbrella company
  6. The umbrella company will then deduct their margin, as well as Income Tax and National Insurance Contributions before paying the contractor. The contractor will also be reimbursed for any legitimate business expenses incurred during an assignment

What benefits could I enjoy?

There are even more positives to list here! If you decide to join an umbrella company, then you’ll automatically become entitled to the following benefits:

  • Statutory Sick Pay (SSP)
  • Statutory Maternity Pay (SMP)
  • Holiday Pay

Employees can also enjoy reward schemes, private healthcare plans and referral incentives.

I’m interested, what are my next steps?

We have a collection of guides to assist you with your journey, another example of how we’re with you all the way. To get the ball rolling, get in touch with our Best Advice team on 0800 464 0412.