Working on a contract, a temporary or interim assignment usually means that you, the contractor, have to choose your employment status. In contrast to permanent employment, you’re unlikely to be employed by the organisation you work for.

The likelihood is, if you’ve found your assignment via a recruitment agency, you will have the choice of either using an umbrella company or setting up your own limited company. This might seem a complex and daunting decision, especially if you haven’t worked on a temporary contract before.

At Green Lantern Group, we’re all about taking the complexity out of things, so here are some simple definitions and explanations to help you make the right decision.

What is an umbrella company?

An umbrella company is a company that specialises in providing employment and payroll services for companies that either can’t or choose not to employ workers that they engage.

How does an umbrella company work?

If you are looking for a hassle-free option and are unsure if contracting is for you long-term, using an umbrella company could be your best option.

An umbrella company will invoice the recruitment agency or end client for your services. After deducting fees and employment costs, the umbrella company will ensure that you are paid for the work you have completed.

Umbrella company and employment rights

Acting as your employer, an umbrella company will provide you with a contract of employment. It will also ensure that you get the statutory benefits and employment rights that any other employee would get, including holiday pay, sick pay and pension contributions. The umbrella company is also responsible for ensuring that you get paid regularly and correctly.

Ensuring that you pay the correct tax and national insurance, an umbrella company will provide you with a payslip confirming how much you have been paid.

Whilst an umbrella company is responsible for your pay and welfare, it is not responsible for finding work or assignments for you.

What is a limited company?

A limited company is a business that you set up as an owner and shareholder. As a limited company, you invoice your clients for your services.

If working on contract assignments is a long-term lifestyle or professional ambition, then setting up your own limited company may be an option you’ll want to consider.

Setting up a limited company means that you operate as a business rather than an individual and gives you full autonomy and control over how you work.

Why set up a limited company?

You will have more responsibilities as a director of your own limited company, but you will also have much more influence over the type of work you do and who you do it for.

Working as a contractor via a limited company expands the scope of services you can offer to other businesses. It also allows you far more flexibility in how you deliver work for clients.

Providing services through your own limited company does mean that you will have to consider legislation such as IR35 when choosing assignments or providing services. However, the team here at Green Lantern are always on hand to advise when needed.

There are also some associated costs, such as accountancy fees and professional insurance when running a business, but setting up a limited company can often be the most tax-efficient way of working.

As a company director, you retain complete control of business finances, managing your income to best suit you and your lifestyle.

Throughout the process, from company set-up to delivering services and completing contract assignments, Green Lantern can support and advise you on how best to manage your company and its finances.

Umbrella company or limited company, let Green Lantern help you decide

Green Lantern can support you whether you decide to use an umbrella company or set up a limited company.

At Green Lantern, we’ll help you consider all of the important factors you need to make the right decision for you.

Through our thorough consultation process, we’ll help you confirm your circumstances, define your aims and ambitions, and consider all of your options to decide on the best solution for you.

Green Lantern offers experience and expertise that provides slick and simple employment and payment processes if you opt to use an umbrella company. Supported with a market-leading employee benefits package, Green Lantern is committed to supporting you and your welfare throughout your contracting career.

Choose to set up your own limited company, and Green Lantern can assist you every step of the way. From setting up your company to filing your year-end accounts, Green Lanterns accountants can advise and assist you with every element of running a successful business.

If you’d like further information or advice on umbrella companies or limited companies, please contact the team at Green Lantern on 0203 696 4120.