The goal of an umbrella organization is to make the lives of the contractor easier. They are tasked to take care of anything administrative-related and as well as handle financial matters and taxes. If you are a contractor and you are thinking of making the big switch to umbrella companies, then this article will help you make a decision.
Advantages Of Working Under An Umbrella Organization
- Easy and stress-free sign-up
Contractors will be asked to provide personal information such as an address, date of birth, assignment details and National Insurance number just to name a few. Once the contractor can provide all the needed documentation, then the umbrella organization will handle the rest.
- Umbrella companies are compliant with HMRC regulations and UK tax law
Contractors will be paid corresponding with the HMRC regulations and UK tax law. This means that the contractor will not have to worry about any financial investigations in the future.
- Contractors will get employee benefits
When a contractor signs up with an umbrella organization; they automatically become their employee which means that they are eligible for employee benefits such as maternity or paternity pay and sick pay.
- No lock-in period
Working under an umbrella organization does not mean that you are tied up with them until the end of time. The umbrella organization will only deduct their margin everytime they process the contractor’s payroll. This means that there will be no joining or even leaving fees if the contractor decides to end their service.
Contractors can work under an Umbrella company for as short or as long as they want. They can choose to work under the company for a short work stint or they can be under them for a few months depending on the workload.
- Umbrella companies will take care of admin tasks
This will give the contractor more time to focus on their work or even sign up for more workload. They do not have to worry about paperwork or anything that has got to do with back-office tasks.
Disadvantages Of Working Under An Umbrella Organization
- It is not tax-efficient
Contractors will get more when they get paid through a limited company because of the combination of their salary and dividends.
- Some umbrella companies are quite sneaky and shady
Unfortunately, some of these companies would give their contractors an illusion that they will get more take home pay than what they are supposed to get. The best way to avoid these scams is to check on the credibility of the umbrella organization.
Take the time to research the organization through reviews and feedback from contractors who have partnered with them. It is also important to note that all umbrella companies will process the contractor’s payroll through PAYE.
- Contractors do not have actual control of their finances
Some contractors may want a more hands-on approach which is why they won’t opt for an umbrella organization. Contractors won’t be able to control their finances since their take home pay already has deductions.
