What is it?
It’s an institution that aids contractors and entrepreneurs with their payroll concerns. It’s a systematic approach created to make certain that each and every organization and staff gets the right amount of salary, and pays the right amount of dues to the government. But the big question here is, how can an umbrella company help you?
Some of the ways are as listed below:
Imagine you have a fixed term contract from a recruitment agency. Before you begin work, the agency will want you to form a limited company. This reduces the agency’s liability. But having a limited company increases the amount of admin work you have to do.
If you employ an umbrella company, it sends out invoices on your behalf to the recruitment agency or directs to your client. When the agency or client pays the invoice, the umbrella company pays through the PAYE (Pay As You Earn) scheme.
The company also ensures you’re able to claim related expenses. It puts these against your tax liability. The costs include the cost of accommodation, professional subscriptions, and travel.
As stated above, an umbrella company uses PAYE. This means you receive your pay according to your tax code and tax rate. HMRC (Her Majesty’s Revenue & Customs) administers these by government legislation. HMRC also lays down the expenses you can legitimately claim.
The other advantages an umbrella company can give you may differ. If you want to use such a company, see what each one has to offer.
- For example, an umbrella company charges a fee for its services. But because you’re a contractor, there may be periods when you’re not working. You, therefore, don’t want the company to charge you when you’re between jobs.
- You also want to maintain your employee status wherever you’re working. It’s the nature of contracts sometimes to take you abroad. If so, check that you keep employee status when you’re overseas.
- Contractors are professionals, so you should expect a company to offer professional indemnity cover. See if this is available.
- You don’t want to have to worry about paperwork. You want to focus on your contract. Make sure an umbrella company deals with all paperwork. And check that it has a support team you can contact. This team should give you expert advice and prompt answers to your queries.
- You also want your pay made on time and without fuss. This is particularly relevant if you’re working abroad. After all, you may want your family back home to have access to a regular income.