Umbrella company advantages
Using an umbrella company for your payroll has its advantages and disadvantages. In this piece, we’re going to summarise the most common umbrella company advantages. You may be surprised to know that there are plenty.
Using an umbrella company is regarded as the easiest way for contractors to be paid. After completing the registration process, all a contractor needs to do is submit their signed timesheets on time. The umbrella company will take care of the rest and ensure its employees (contractors) are paid on time.
Registering with an umbrella company is easy, and once you’ve registered, you’re free to hop on and off their payroll as you please. There are some standard procedures involved when you register with an umbrella, including providing them with a fair amount of personal information. Don’t worry – this information is required by the umbrella to legally process your payroll. Once you’ve provided the information required, you’ll then be required to read the documentation the umbrella sends you (Contract of Employment, Employee Handbook, etc.). Then – you’re done! All you need to do after that is submit your timesheets.
Continuality of employment
When you join an umbrella company, you can benefit from continuity of employment – and this is a big deal. You’re able to take on multiple assignments with different clients, but your umbrella company will officially remain your only employer. This is really handy if you’re looking to get finance such as a contractor mortgage, or bank loan.
No tie in
There is no tie in period when you join an umbrella company. You are free to use them for as long as you please!
Compared to paying a contractor accountant to assist you with a personal service company (PSC) – using an umbrella company is good value. They charge a margin to process your payroll and this applies whenever you’re paid (usually weekly, fortnightly or monthly). Every umbrella company processes payroll in the same way and the only thing that varies between providers is their margin. Therefore, look out for an umbrella with a low margin – as you’ll retain more of your pay (although not much – in all honesty). Umbrella company margins are usually between £15 and £30 per week.
Compliance, and no risk of an HMRC tax investigation
Umbrella companies will process payroll in accordance with HMRC’s tax system – Pay As You Earn (PAYE). This means that all tax and National Insurance deductions are made by the umbrella and sent to HMRC before employees are paid. This compliant payroll method will ensure contractors pay the right tax and National Insurance, and won’t face an HMRC investigation in the future.