Umbrella Company – What is it? 

What is an umbrella company? 

An Umbrella company is an intermediary company that employs workers who would otherwise be independent like agency contractors who work on contract assignments, self-employed, contract workers or freelancers. 

The umbrella company provides payroll services on behalf of the contractor and bills the agency (who in turn bills the client) for work completed by the contractor. The umbrella company provides all social contribution and tax payments (including “PAYE, Pay As You Earn” in certain jurisdictions) and equivalents and National Insurance returns on behalf of the contractor

Why use an Umbrella company? 

Umbrella companies have become more popular and have grown substantially since the reforms to IR35 in the private sector in April 2021.

Umbrella companies broadly provide two sets of benefits to contractors. a) Standard set of Statutory Payments like Statutory Sick Pay (SSP), Statutory Maternity Pay (SMP), Holiday Pay etc. b) Other employment lifestyle benefits like Clinical counselling, Legal Support, Dependent Care, Critical incident support

There are plenty of benefits for joining an Umbrella Company for both workers and companies, here we outline a few: 

Benefits for workers 

• Simplify taxes: One of the main reasons to choose this option is because being paid as an employee through PAYE is much simpler than figuring out your own taxes and paying on your own. It also saves workers from possible cases of disguised employment if they take advantage of self-employment tax breaks. 
• Provide benefits: By becoming an employee of an umbrella company, workers can also receive benefits they wouldn’t receive as a contractor. 

Benefits for companies 

• Avoid worker misclassification: Countries have their own laws about what legally constitutes a contractor-client relationship versus an employee-employer relationship. When you hire workers with an umbrella company, these workers are already classified as employees, so you don’t have to worry about potentially misclassifying them. 
• Facilitate international employment relationships: Companies that want to start hiring internationally may also want to partner with an umbrella company in the country they’re interested in, The umbrella company can help them legally hire contractors in another country.

If you are wanting to have help with your payroll then contact our team at iConsult where we are happy to chat with you about how we can help you enquiries@iconsultumbrella.co.uk