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What are the benefits of working as an umbrella company contractor?

There are plenty of benefits to working through an umbrella company for contractors. That's why thousands of contractors choose umbrella over the PAYE or limited company routes.


If you're considering making the move to an umbrella company going into 2024, Umbrella Search has rounded up the 5 main benefits of this way of contracting so you can make the right decision for your career.


Benefit from hassle-free contracting


One of the widely recognised benefits of contracting through an umbrella company is that it will make your life as a contractor a whole lot easier.


An umbrella company takes many tasks and responsibilities off the contractor's plate, leaving you with more free time to either make the most of your well-earned downtime or focus on the contract at hand.


Week to week, the contractor has to simply provide the umbrella company with their timesheet, which outlines hours worked within the timeframe. The umbrella company then draws up an invoice accordingly and bills this to the client, meaning there is no involvement for the contractor in the process.


Next, the umbrella company will collect the payment directly from the client and process it through their company payroll before paying the contractor their salary. Again, this means that you can rest assured that you will be paid on time each month rather than worry about troublesome tax returns, calculations and late payments.


What's more, the umbrella company will also take care of any paperwork and admin that arises from the contract, such as processing expenses, enrolling you into a pension scheme and dealing with any communications with the client.


Benefit from being employed


Another benefit that contractors can expect to enjoy when working through an umbrella company is becoming an employee.


When a contractor signs up with their chosen umbrella company, they become employed by the provider.


In return the contractor will benefit from a number of things such as statutory benefits, enrolment on a workplace pension scheme, continuity of employment, making applying for loans and credit much easier, and paying tax as an employee which we will take a look at next.


By becoming employed by the umbrella company, many contractors may worry that they will lose their freedom or autonomy. However, the great thing about umbrella company contracting is that contractors are free to choose when they work, which clients they choose to work with, what projects they take on and how they progress in their careers.


Unlike a PAYE agency through which the contractor has no freedom over which contracts they have to work on, an umbrella company essentially grants contractors freedoms similar to being self-employed such as being able to choose their work to their own schedule, combining this with the benefits of being an employee by giving them the security of a salary, taking care of finances and giving them statutory rights.


What is an umbrella company?

Benefit from PAYE


PAYE, which stands for pay-as-you-earn, is the most common way for employees in the UK to pay tax. The system works by deducting the correct levels of tax and National Insurance from your monthly pay.


When you sign up to an umbrella company, your pay is processed through their company payroll and will be taxed through the PAYE system.


This gives you much needed peace of mind that your tax affairs are always up to date and in order.


This is great news for contractors who'd prefer to get on with the task at hand rather than worry about tricky tax returns and ensuring you are putting enough of your income aside to cover the next tax bill, a common worry for limited company contractors.


Benefit from statutory rights


As we have already touched on, as an employee of your chosen umbrella company, you will also benefit from statutory rights.


This covers holiday pay, sick pay and maternity and paternity pay. This means that if you need to take time off work in the case of illness, having a child or just wanting a well-earned break, you will receive statutory pay for the time you're not at work.


Again, this is in contrast to limited company contractors who, in the instance that they cannot work for any of these reasons, will not receive statutory pay and will lose out on the income of not being able to carry out the contract at hand.


You can read more about umbrella statutory rights in our handy guide.


Benefit from forgetting about IR35


Every contractor knows about infamous IR35 legislation, and no one wants to get caught out by it. That's why many contractors choose the umbrella company route as it effectively means they are exempt from IR35.


As the contractor becomes employed by their chosen umbrella company, IR35 simply does not apply to them, meaning no worrying or stress over whether they're in or outside the legislation.


Ready to benefit from working through an umbrella company?


Having read our guide to the benefits of working through an umbrella company, you might have decided that it's the right time to make a move and sign up.


Before you jump the gun, the next step is to ensure you find an umbrella provider that's right for you. After all, there are lots of umbrella companies out there competing for your custom, so it's important that you find one that's the best fit for your contracting needs.


Umbrella Search can help cut through the noise in order to find the best-suited umbrella company for you. Whatever you're looking for in an umbrella company, we'll work closely with you to provide recommendations based on your needs.

Why not see how we can help find the perfect umbrella company for you by simply getting in in touch with our friendly team today?


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