Stand under my financial umbrella

Many people might like the idea of working as a contractor and being their own boss, but they may be put off by the need to set up and run their own business. Umbrella companies offer individuals the opportunity to be self-employed without this hassle. Businesses can also benefit from using such companies as it cuts down on the amount of administration that comes with running a business.

Umbrella companies employ contractors to work for them under fixed term assignments. The company will obtain assignments from a recruitment agency or a client with which it will sign a business-to-business contract. The umbrella company employs the contractor and thus their employment contract is with the company. The client for whom the contractor is working will confirm the number of hours the contractor has worked. A contractor may also claim for certain expenses incurred as part of the job. The contractor submits timesheets and expenses claims to the umbrella company. The umbrella company then raises an invoice with the client for the expenses and hours worked by the contractor. The client pays the recruitment agency that in turn pays the umbrella company or the client pays the umbrella company directly. The umbrella company processes the payments received and then pays the contractor just like any other company. The umbrella company takes care of any taxes that are owed before paying the contractor. Different umbrella companies have different payment schedules. Some will pay out immediately and others will only pay monthly.

The advantage to an individual of using an umbrella company is that he or she can have the flexibility of being self-employed without having to set up a company. Both companies and individuals can benefit from using an umbrella company because they will not need an accountant to work out all the tax owed to the government. As umbrella companies take on the responsibility of calculating tax and the day-to-day operations of running a business it makes life simpler for both individuals and companies.

As well as taking care of details such as taxation umbrella companies also handle claims for legitimate expenses. Short-term contracts can mean having to stay away from home or extra travel expenses and these can be offset against tax. There are costs associated with setting up a business such as insurance policies and accountancy fees. With an umbrella company all of this is taken care of and this makes it easier for individuals to move between contracting jobs and permanent employment.  Umbrella companies are easy to register with and as the companies are already established there are no set-up costs involved and if an individual decides in the future to return to permanent employment there are no costs associated with winding up a company. As the umbrella company employs the individual he or she has the same rights and benefits as any other employee.  Business owners are able to concentrate on their core business without having to concern themselves with tax and other administrative details.