Why Working Through An Umbrella Company is Advantageous
3 mins read

Why Working Through An Umbrella Company is Advantageous

A great number of challenges face independent contractors around the UK. In addition to weathering a post-pandemic economy, contractors must also consider the looming IR35 deadline, which is currently set to occur in April 2021. The growing difficulty of these challenges is the reason why a greater number of independent contractors are now seeking to adopt umbrella company payroll.

What is Umbrella Payroll

An umbrella company is a third-party limited company that, when joined, takes on the role of an acting employer. The umbrella company then provides a payroll service to the contractor, as well as facilitating services with end clients or recruitment agencies.

All manner of responsibility for payroll-related services, such as timesheets, tax deductions, and invoices, are then hand over to the umbrella company, relieving the independent contractor of the task. The contractor’s salary will then be paid to them via the umbrella service, as with a standard employer. Having the administrative tasks of payroll handed over to a third party is a popular reason why many contractors choose to seek umbrella services.

What are the Benefits?

Alongside the alleviated paperwork, there are numerous reasons why contractors continue to seek options, such as umbrella payroll from People Group Services, one of which is the access to employee benefits.

As an independent contractor with an umbrella, you will not be entitled to holiday pay, sick pay, or paternity/maternity leave. These benefits, which are typical of being an employee, are a significant appeal to many contractors who would otherwise have to arrange and subsidise their own alternatives.

As mentioned above, planning for upcoming IR35 changes is a task all contractors must take on to ensure that they are compliant. Failing to do so will lead to substantial penalisation and charges. By joining an umbrella company, however, contractors will not need to worry as the IR35 rules do not apply.

Most reputable umbrella companies will also offer various insurance policies as part of their services, enabling contractors to offer their services to clients under the safety net of insurance coverage.

Joining the Right Umbrella Company

Finding the right umbrella company is important and their services should meet your needs as a contractor. Fortunately, the popularity of their services has created a significant market and there are now many high-quality, reputable umbrella services available.

Since they will be managing your business’s finances, it is important that you feel comfortable. Primarily, this comfort comes from communication and the highest-rated umbrella services are those with excellent standards of customer service and care.

Once you have found an appropriate umbrella company, signing up is straightforward. As with any employer, you will sign a contract, supplying necessary documents and details, such as your National Insurance number and P45, as well as your Right to Work. You will then become an ‘employee’ and given an appropriate tax code.

This simplicity, alongside the abundance of advantages over alternative payroll methods, is why umbrellas are a continuously popular choice of service among independent contractors.