With changes in the economic landscape over the past few years, many people are switching from full-time jobs to alternatives such as freelancing, being self-employed, or becoming contractors. But these alternatives mean that apart from offering your services, choosing these alternatives also includes handling all other aspects of the work, such as finding clients, managing payments, taxes, etc., which can be an unnecessary burden.
The solution? Umbrella companies have been around for a while, and they have risen in popularity at a swift pace due to the many advantages they have to offer for such work arrangement categories, including contracting.
How does an umbrella company work?
When you sign up with an umbrella company, you become an employee, and your work arrangements with all clients are managed through the company. The UC (Umbrella Company) signs contracts with end clients, and you sign your contract with the UC. You manage your work and responsibilities as normal, submitting invoices and work particulars to the UC, which bills it to the client and gets the invoices paid. The UC then manages your taxes, charges, and fees for its own services and then pays you the final amount.
Let us take a quick look at umbrella companies’ various benefits and advantages.
No need to worry about the IR35
IR35 is the legislation passed for taxation and NIC contribution regulation, and as of April 2021, contractors working in the private sector are not allowed to decide their IR35 status. However, you need not worry about this since you are treated as a permanent employee when you work with umbrella companies.
The UC also goes a step further to help you by handling your taxes and displaying them in your payment details. All your tax amounts, details, and deductions are sent to HMRC by the UC, and you don’t have to worry about saving on taxes or paying fewer taxes than what is due.
No hassle contracts and work
The most important benefit of being a contractor is being your own boss and having a great work-life balance. UCs help you attain this by managing your contracts, taking care of administrative tasks, and a lot of paperwork. Besides managing taxes, UCs also help with mundane stuff such as follow-ups, invoicing, compliances, and other relevant HR matters.
As a result, you can keep your desired work hours and take on the contracts you want. You also need not worry about signing contracts you do not wish to and engage in a flexible and open work environment.
The best of both worlds in terms of employment modes
UCs create a work arrangement for you with the best of what a permanent job and a contractual work arrangement offer. Apart from the flexibility and ability to choose the work you wish to take, you get the benefit of exploring more opportunities while answering to yourself. On the other hand, you get the same benefits as offered in the case of full-time employment, such as maternity, paternity, and sick pay, along with basic leaves per annum, depending upon factors like working hours.
You also get to work for multiple clients, and being employed full-time helps secure finances and loans as well, which is a major benefit and advantage of using UCs.
The PAYE benefit
Working with us allows you to be paid under PAYE or Pay As You Earn, which has various benefits and advantages. This arrangement simplifies your payments and invoicing and maintains clarity and transparency. With flexible settlements, the PAYE system allows the UC to get your invoices cleared and then make your payments after all the necessary deductions. In addition, you get all the statutory benefits of being an employee, adding a layer of safety to your finances.
According to a survey, most people do not save enough for retirement. This is why the government’s Pension Auto Enrolment Scheme was launched in 2012 to auto-enroll eligible people under the scheme. When working with a UC, you get the benefits of this auto-enrolment and save a portion of all your earnings as a pension to fund your retirement.
Despite freelancing being around for a while now, things are still tough for those who choose alternative work modes. Things like loans and bank finances are tough, managing taxes can be a headache, and there are various other issues as well. However, UCs have made it a lot easier for contractors to work on the contracts they like with the peace of mind that a beneficiary organization is looking out for their interests.