For many contractors, choosing to work through an umbrella company is the easiest, most hassle-free way of working that gives them access to a wide range of benefits.
If you have decided that an umbrella company is the best option for you this new year, then there are a number of things you must be aware of, including how you will be paid through the umbrella company.
Thankfully Umbrella Search is here to help. We have put together this guide outlining how you will be paid through an umbrella company, to see if this will be the best way for you to contract in 2023.
What is an umbrella company?
Let’s start with the basics.
Working through an umbrella company has become an increasingly popular alternative to the limited company or PAYE agency route in recent times.
This is because an umbrella company takes away much of the effort and stress of contracting whilst offering the contractor a range of benefits and services they would otherwise not receive through a limited company.
What services and benefits does an umbrella company offer?
The aforementioned services and benefits that the umbrella company offers to the contractor includes:
- Taking care of the contractor’s tax and National Insurance obligations, meaning less time that the contractor needs to focus on their tax affairs.
- By employing the contractor, an umbrella company also removes the worry and stress of IR35 legislation. This is because as an employee, the contractor is exempt from the legislation and can contract free in the knowledge that they won’t be subject to costly or timely IR35 investigations.
- The umbrella company also takes care of a range of matters for the contractor, including a range of essential paperwork and admin tasks. This helps to free up much of the contractor's valued time and means that they have more effort and energy to put towards focusing on the contract at hand.
- An umbrella company also grants the contractor a great degree of freedom and flexibility. After all, if you decide that you wish to take a break from contracting, or conclude that this isn’t the right path for you altogether, you do not need to worry about having to close down a limited company.
- The umbrella company will also enroll the contractor onto a workplace pension. This means that the contractor, should they earn £10,000 or more per year, will have a helping hand toward saving towards the future.
- The umbrella company also ensures that the contractor receives statutory rights. This means the contractor will receive statutory pay in the instance that they take maternity or paternity leave, take holiday leave or sick leave.
- Finally, the umbrella company will also ensure that the contractor is covered with the correct levels of insurance. After all, contractors are required to be covered for particular instances, but again, working through an umbrella company means this is taken care of for contractors.
Those are the benefits and services offered by an umbrella company to the contractor. If, like thousands of other contractors across the UK, that sounds appealing, you might want to find out more about how getting paid through an umbrella company works.
Next, we will look at this in more detail.
How will I be paid through an umbrella company?
Once signed up to the umbrella company, the contractor will deal directly with them, not the client.
Unlike a limited company contractor, who must deal with creating invoices, sending these over to the client and chasing any late payments, the umbrella company will take care of all these tasks on the contractor’s behalf.
The contractor simply inputs a timesheet to the umbrella company, who will then invoice the client for the correct number of hours worked. The umbrella company will also handle the chasing up of any overdue payments if they are not made on time.
The umbrella company then gathers the contractor’s fee directly from the client. They will process the figure through their company payroll. During this process, the correct levels of tax and National Insurance are taken from the contractor’s pay, before it is then passed on to them.
Here, the contractor is paying their tax through the PAYE tax system, which is how most UK payroll workers pay their tax. This makes paying tax easy and hassle-free as it means the correct amounts are worked out and paid directly to HMRC.
Therefore, umbrella company contractors do not need to worry about chasing payments and working out how much tax they owe, as this is all done for them.
The contractor can rest assured that they are up to date with their taxes and don't need to worry about paying their tax through self-assessment, which can often be a complex and time-consuming task.
Just as it sounds, working through an umbrella company makes contracting easy, taking away the tricky tasks of dealing with invoicing, finances and taxes.
Use Umbrella Search to find your perfect match
Finally, anyone considering using an umbrella company should seek the advice of professionals to help them find the perfect umbrella provider for their needs.
With so many umbrella companies out there, seeking the help of Umbrella Search will remove the hassle and hard work of finding the best umbrella company
suited to them and their contractor requirements.
At Umbrella Search our team of friendly professionals will work closely with you to research umbrella companies and carry due diligence to find the one that is aligned with your contracting values and needs, in terms of umbrella fees, the services and benefits the umbrella company will offer you and how much your salary will be.
Using Umbrella Search allows contractors to find an umbrella company with no stress or hassle.
To give it a go for yourself, and to take the first steps to finding the best umbrella company for you, simply get in touch with the Umbrella Search team today.