Why should contractors choose to work through an umbrella company?

Deciding to work through an umbrella company has many rewarding benefits. Milosz Krasinski, Digital Marketing Specialist at Churchill Knight & Associates, outlines the specific advantages that are available to contractors.

An easy solution for any contractor is using an umbrella company. Yet, there are some factors that determine and enhance the benefits of an umbrella company for more than others, including:

• First time contractors, looking to get a feel for self-employment before they consider opening their own limited, personal service company;
• Contractors who are receiving under £15 per hour;
• Contractors with a contract length of 3 months or less;
• Contractors employed in the public sector;
• Contractors who are not interested or able in becoming the director of their own limited company.  

Signing up with an umbrella company is an easy procedure. First, a registration form must be filled out with your personal details and information regarding your assignment. Expect to be asked for proof of identity and address.

Once the registration form has been received and the umbrella company has secured your details, you must sign a contract.

Working with an umbrella company is, arguably, the easiest way to get paid as a contractor. Once the registration form has been completed and you have formally been authorised as an employee of the umbrella company, administration should only take an estimated time of 10-15 minutes a week.

Via the online umbrella company portal, contractors can upload signed time sheets and distribute copies to recruitment agencies. Any expenses that need to be claimed for these will need to be uploaded also onto the portal.

Employee Benefits

When working through an umbrella company, your wages are paid via PAYE. Thus, you will have access to the Employee Benefits that all permanent employees are entitled to, such as Sick Pay, Maternity and Paternity Pay and Annual Leave.

It is obligatory that you choose an umbrella company that functions in complete compliance with HMRC legislations, along with being regulated frequently and audited by industry professionals, such as Professional Passport. 

Covering insurance

Umbrella companies that are respectable and leading within the industry will offer insurance whilst on your assignments at no extra cost. These insurances include:

• Employers’ Liability Insurance;
• Public Liability Insurance;
• Professional Indemnity Insurance.

Typically, setting up an umbrella company is free – so is leaving. Checking your selected service provider’s history is important to gauge whether it have positive image in the industry, and if customers are happy. You can do this by calling the company and engaging with its consultants to gain a better understanding of its level of customer service.

The industry is full of umbrella companies that claim they are the best. So, when choosing an umbrella company, looking for features such as an assigned consultant who can answer your questions quickly and professionally, will make your life significantly easier. Finally, remember to be mindful of umbrella companies that are not certified by the HMRC.