How does an umbrella company work?
As a contractor, the chances are that you’re always looking for ways to save time and money – after all, you work hard, and at the end of a busy week, you want to relax and unwind. Don’t we all!? One of the most common ways for contractors to do both of those things is to enlist the support of an umbrella contracting company who can work on their behalf. Below, we’ve rounded up everything you need to know about umbrella companies – read on for more info.
Find the right umbrella company
First up, shop around to find the right umbrella company for your needs. Some specialise in a particular field or have more experience in one industry than another. Some are generalists and will offer support to entrepreneurs and freelancers across a whole host of niches. We suggest looking at reviews for your umbrella company online, reaching out to see how long it takes them to respond and looking at their website to determine whether they’re the right fit.
Sign a contract
Once you’ve instructed an umbrella company to work for you, a contract will be issued to your recruitment company. Once that has been done, you’ll be asked to sign an employment contract with the umbrella company, and officially become an employee of that umbrella. It is important to note that some umbrella companies offer company benefits like sick pay and maternity leave, but you should look into this before you sign a contract to know your rights.
Speaking of maternity leave, it’s important to mention that employers must perform health and safety risk assessments for pregnant workers, and workers can accrue holiday pay when they are on maternity or paternity leave. It may be a case of both umbrella company and recruitment agency working together to supply the necessary information and support.
Submit your timesheets
Once you sign up with an umbrella company, you’ll be asked to submit timesheets with info on the hours you’ve worked during a particular week or month. You’ll also need to write down any expenses you’d like to claim. As an umbrella employee, you can claim for mileage, job equipment, and training expenses, and you must keep receipts as HMRC may ask for proof. It is important to note that HMRC can investigate you for up to six years, so holding onto those is important – your umbrella company might ask you to upload them to a digital folder.
Receive your wages
Finally, you’ll be paid by your umbrella company once per week or month, depending on your preference and the way you’re paid by your recruitment agency. Note that you’ll be paid after tax and National Insurance contributions have been deducted, saving you unnecessary admin and bookkeeping time. You’ll also receive a payslip from your umbrella company, and wages will be paid directly into your bank account on the same date every week or month.
Though not for everyone, umbrella companies are a great way to save time, avoid unwanted stress, and focus on working and spending your money when you’re off. Look into all of your options and seek independent financial advice before making any big money decisions.
