The Umbrella route is an ideal option for contractors what want to maintain the flexibility that contracting offers, whilst gaining the benefits employment can bring.
An Umbrella company becomes the employer of contractors who are usually not in a position to operate their own limited company, or prefer the security employment offers.
The majority of responsibilities expected of agencies with regards to contractors is taken over by the umbrella company. This includes eligibility to work checks, the liabilities and administration of PAYE, holiday pay and sick pay.
In some circumstances contractors are able to claim back business related expenses. Depending on whether an individual is subject to supervision, direction or control these could include: allowable travel, PPE and subsistence whilst on assignment.
There is no burden to ensure financial paper work and tax liabilities are produced and submitted, due to the fact that, as an employee, you are not trading on your own account.
The countless advantages and the security that being in employment can bring (e.g. holiday pay, SSP and insurances) but with the flexibility that contracting affords.
Effective support from human resources and health & safety departments.
Contractors will benefit from personal accident cover that will provide compensation should they be unable to work due to an accident on assignment.
As contractors will be in continuous employment, their credit status will be improved.
This one is definitely a myth. As covered above, there are many benefits to working through an umbrella company, the most obvious being the fact that the contractor becomes an employee, giving access to all statutory benefits such as sick pay, maternity and paternity pay.
Another misconception with Umbrella companies is that there are hidden charges. This is another myth and here we will look at why.
The only charge an Umbrella company takes is a margin. This is explained to the contractor upon registering with the Umbrella company, and it is necessary in order for the company to look after your administration.
One of the common misconceptions is around the deduction of Employer’s National Insurance. Flamingo Umbrella and many other reputable companies will be open and transparent about this deduction. All employers are legally required to pay Employer’s National Insurance. When it comes to contractors, the deduction is factored into the assignment rate, and is paid in addition to the contractor’s gross pay. This can cause confusion that the contractor is paying their own Employer’s National Insurance costs, but it does not come from their gross pay, but does need to be factored into the assignment rate when this is agreed with the agency.
If a contractor is using a reputable umbrella company, there should never been any hidden exit charges. They should be free to leave whenever the assignment ends or as and when they wish to do so, and should never be charged an exit fee.
This most definitely is not true. All reputable Umbrella companies provide a legitimate option that allows contractors to access the benefits of employment whilst working on various assignment, providing flexibility and security. Full transparency of how their payment is processed, access to statutory benefits and a contract of employment should be offered.
