What is Umbrella Employment?

What is Umbrella Employment?

Dec 22, 2021

Umbrella, Workwell News

Stepping into self-employment can be extremely exciting. You’ll have greater freedom over when, where, and how you work, as well as a choice over which roles you undertake. However, before you get started, you need to choose which working structure is best for you.

What is Umbrella Employment?

Umbrella contracting is a great way to enjoy the freedom and flexibility of contracting while still maintaining access to a wide range of employment rights, protections, and benefits such as holiday pay, maternity/paternity/adoption pay, and sick leave. It is often the first step contractors take on their contracting journey when they’re not quite ready to start up their own Limited Company and it’s also a perfect solution for contractors who have received an ‘inside’ IR35 status determination statement on one or more of their roles.

To contract this way, you become an employee of the Umbrella company who will supply your services to other companies (end clients or recruitment agencies). You can operate one contract at a time or switch seamlessly between multiple contracts while building a record of continuous employment. This can be invaluable when seeking a mortgage or other types of loan.

You can continue to enjoy the benefits of working flexibly for a variety of end clients, but you will be legally employed via your chosen Umbrella company.

How are payments processed?

Where you choose Umbrella employment, you’ll have an employment contract with the Umbrella company, which in turn, will engage contractually with the end-client or recruitment agency it is supplying you into.

The Umbrella will invoice the client or agency for its services (supplying its employee) and from this fee, the Umbrella accounts for its costs and retains a profit margin before paying a salary to you. The diagram below illustrates this process.As an Umbrella contractor, you will pay Income Tax and National Insurance contributions on all your income at source, just like any employee would. Don’t worry, we’ll calculate the standard deductions and display them clearly on your payslip so you don’t have to worry.

For a more detailed breakdown of how your pay is calculated, download our Guide to Umbrella Employment or get in touch with our friendly advisers on 01923 257257.

What are the advantages?

Umbrella contracting is the most simple and easy way to work as a contractor since we’ll take care of all your tax and compliance responsibilities for you. Although you’ll no longer have the same tax efficiencies, there are plenty of advantages to working this way:

  • Access to employment rights including holiday pay, sick pay, maternity/paternity leave, and pensions.
  • Build a record of continuous employment with a singular tax code, making it easy to seamlessly switch between contracts and apply for mortgages or other bank loans.
  • You will not be required to take on the same admin and accountancy responsibilities as Limited Company contractors. This means it’s a much simpler and easier way to work – allowing you to focus your time on delivering quality services and building your skills.
  • Protection from any non-payment. The Umbrella company will be your employer and responsible for ensuring you get paid.
  • Each Umbrella company will have additional employment benefits. With Workwell Umbrella, we provide a wide range of insurance cover (as standard), the option to continue paying into your SIPP / Private Pension, and access to our exclusive rewards programme which offers discounts on high-street brands, holiday and leisure savings, and a mental health support hub – among other great benefits.
  • With Workwell Umbrella, you’ll also have access to our secure online portal making it simple to submit timesheets, receive payslips, and communicate with us and your agency at the touch of a button.

Advice and support

If you’re considering Umbrella employment, we’re here to help. We can provide you with example take-home pay illustrations so you know exactly what to expect before you sign-up, helping you determine if this working model is right for you.

Click here to find out more about Workwell Umbrella or get an instant quote here.

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