Over the past 14 years, an increasing number of people have started using umbrella companies. This gathered pace after the global economic collapse of 2008, when many workers used to full time employment suddenly moved into contracting. Today umbrella companies play an important role in the economy – but what exactly are they, what do they do, and what are the advantages of hooking up with one?
What is an umbrella company?
Simply put, an umbrella company is a business that enables contractors and people who would otherwise be self-employed to enjoy the simplicity of an employee relationship even though they may work for more than one employer, or work only on short term contracts. The main task of the umbrella company is to handle all the admin associated with the work being done, ensure that tax and regulatory requirements are complied with and to ensure the employee is paid for work completed.
What sort of tasks do umbrella companies handle?
Umbrella companies can take care of the following:
- Deducting tax and National Insurance from income and ensuring it is paid.
- Taking care of tax-related paperwork and writing off expenses against tax wherever possible.
- Invoicing clients and chasing up late payments.
- Keeping pace with changing financial regulations and how they affect the employee.
Who do umbrella companies work with?
Although individual companies vary, most offer a wide range of options to suit people who are turning over a lot of high paid work and those who are making just a small amount of money on a short-term basis while looking for new full time jobs. They generally don’t ask for any commitment and, though there may be some costs associated with joining (to cover things like record checks), once registered with them an employee will easily be able to opt in and out of using their services to fit around permanent contracts elsewhere.
What is it like to use an umbrella company?
Using the services of an umbrella company makes the sometimes complicated business of contracting or freelancing much easier. It means that newcomers to this way of working don’t have to learn lots of new admin rules before they can begin. It’s easy to sign up with an agency like Atlantic Umbrella over the web and there isn’t much paperwork to deal with, but workers do have contracts to ensure that their rights are protected and that they have legitimate employee status.
Often, all that umbrella companies require is for a contractor to fill out a weekly time sheet stating how long they have worked and how much they have earned, and to submit any expense documentation to support tax relief claims.
Why choose an umbrella company?
Using an umbrella company is much easier than the alternatives available to most contractors and freelancers. It means there’s no need to go to all the trouble of setting up a new company and managing paperwork, and no need to buy insurance. Whereas that kind of process can take weeks, joining an umbrella company is an almost instant service.