Wednesday, May 9, 2012

The Ins And Outs Of Umbrella Companies For Contractors

If you're venturing into the world of self employment for the first time or you're a contractor who is used to working for a variety of different employers, you may be about to come across an umbrella company for the first time. Designed to help recruitment agencies and clients employ people for specific jobs while simultaneously reducing their liability, umbrella companies are very popular in industries where short term contracts are common.

An umbrella company is an intermediary step between you and the person providing the contract. It will processes a PAYE payroll, meaning that you'll get paid via the umbrella company rather than straight from the company who originally supplied your contract. Essentially, the umbrella company acts as a sort of employer for people who have already been contracted to undertake a specific assignment.

You're most likely to find yourself in need of an umbrella company when you're picking up contracts from a third party, such as a recruitment agency. This can be very useful for the agency, helping them keep on top of a huge number of different contracts, and useful for you too, as you will have a company contact that is dedicated to making sure you get paid for the work you are contracted to do.

Although it will typically be the employer who suggests the use of an umbrella company, it will often be down to you to find one. This should be very easy and once you have chosen your preferred company, all you will need to do is provide information about the client or agency you are contracted to work for and some details about yourself. You should only be asked to provide proof you are who you say you are and any information needed to make sure you get paid, for example, your bank details or home address.

One handy thing about using an umbrella company is the fact that you'll be issued an employee status. You'll get paid by handing a timesheet into the company, which will then be confirmed with the recruitment agency or client you've been working for. The umbrella company will then receive your payment and then pay you through PAYE, enjoying the chance to offset some of the income by claiming business expenses.

You'll also find that being paid through PAYE and being counted as an employee rather than a sole trader could potentially help you be more efficient about your tax. For example, you could have the chance to make the most of childcare schemes or pension plans. It also allows you access to a variety of professional and health insurances that can prove invaluable to busy contractors and entitles you to a wide range of employment rights, including minimum wage and holiday and sickness pay.

Using an umbrella company can be beneficial when it comes to doing your self assessment taxes, as you will be provided with a P45 for each contracted job and you will also get a P60 at the end of the tax year. Gain the freedom to take on contracts from recruitment agencies and clients who prefer to work with the help of an umbrella company and enjoy a variety of associated benefits for yourself too.

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