15 August 2019
What is it?
The primary function of an umbrella company is to organise payment for fix-term work undertaken by independent contractors. Its popularity chiefly surrounds its simplicity, leaving the contractor to concentrate on their work with the knowledge that all responsibilities regarding their income are being taken care of.
How does it work?
When signing up with an umbrella company, you become one of its employees with it acting as an intermediary between you and your agency, or directly with your end client if no agency is involved. As an employee, you will receive a full overarching employment contract and have full employment rights like any other worker. Upon the submission of timesheets, your earnings are collected from your agency or end client and paid straight across to you with all relevant PAYE taxes and national insurance contributions deducted.
What should I look out for?
It is important to do a good amount of research before selecting your umbrella provider – get online, ask colleagues who have had a good experience and speak to your agency who have preferred suppliers and are likely to make recommendations.
The market is unfortunately littered with non-compliant solutions, and although recent government regulations have tried to clamp down on them, they still exist. Some may offer you a big take-home pay with reduced tax liabilities which has its obvious short-term positives but may leave you at risk of large backdated tax penalties from HMRC. Others may run offshore loan schemes or other tax avoidance operations, such as those identified here by HMRC. If it sounds too good to be true, it generally is.
When researching or speaking to an umbrella company, find out how long it has been running and whether it has any industry endorsements, such as fully accredited FCSA membership, the highest level of compliance. Members undergo a rigorous review of their business services, operations and processes in liaison with HMRC to prove they are financially stable and provide a quality service.
At SmartWork, the full package is provided with a host of additional benefits. We process statutory sick pay, maternity/paternity and holiday pay and can assist you with mortgages advice and referencing. We also cover you for all of your work-based insurances, including Professional Indemnity and Employers/Public Liability. We pride ourselves on our personalised service with a dedicated account manager allocated to each contractor. Contractors have access to our SmartWork portal, allowing them to easily upload timesheets, submit expenses and e-sign documents. In terms of compliance, SmartWork is a fully accredited FCSA member, undergoing a yearly audit demonstrating we fully comply with the trade body’s strict code of conduct.
As always if you’d like to get in touch with SmartWork, please feel free to call us on 0800 434 6446 or send us an e-mail at email@example.com. For more news and blogs, remember to follow us on LinkedIn and Twitter.