You may know by now that umbrella companies, whilst not always being the most tax efficient way to be paid, are a popular choice with contractors as they remove most of the nasty paperwork and responsibilities that can be involved with other options out there. But what does it actually mean?
An umbrella company is a company which employs contractors who are providing services to clients on a temporary contract basis. Recruitment agencies are often involved in the chain, and can usually request a contractor finds a way of being paid that doesn’t involve them, as they don’t want to incur the costs of employing you and the other temporary contractors they provide. Also, it saves you as a contractor the hassle of multiple employments each time you change contracts, and allows you the benefit of gaining tax relief because of the expenses you incur when working on temporary assignments – therefore meaning you get a higher rate of return on your wages.
You become an employee of the Green Lantern umbrella company, in the same way that you would become an employee of any other employer. You are issued with a contract of employment, an employee handbook, and have the right to receive any payments associated with your employment and allowed for by the law, for example statutory holiday pay, statutory sick pay and even statutory maternity or paternity pay. This company manages all of your wages and payments and covers you for insurances.
The umbrella company then puts in place contracts with your recruitment company (or if there isn’t one, your end client). We will assist you in finding contracts and as soon as you have a contract offer, you need to let us know, and tell us the details of who we need to get in touch with, and we’ll sort it out.
In years gone by, there were several ways that an umbrella company would structure payments to you, however legislation has meant that each umbrella company structures payments in the same way. This has helped us to be able to provide a very simple, straightforward solution, which removes agency costs, helps keep your life paperwork free, works for us and works for you – increasing your net take-home pay.