Sometimes there just isn’t the time to read through everything you should do. Life can be hectic, and especially so if you’re new to contracting when there seems to be so much to do! Not to worry, Oriel Contractors have kindly put together this useful & informative article which covers all the basics of an umbrella company, and exactly how they work and how all the different parties fit together.

Jim Goddard from Oriel Contractors says: “Many individuals choose to be a contractor, rather than being a conventional permanent employee, because:

• They enjoy working for different organisations

• Like meeting a wide range of people

• Continuously develop their skills set

In turn this makes them a more sellable commodity and able to command a higher daily or hourly rate.”

“You’ll benefit enormously if you can develop two key relationships, from the outset” advises Jim Goddard.

Relationship No1

Much maligned and often criticised the poor old recruitment agent actually does plenty behind the scenes, and works very hard for all the contractors on their books. You don’t have to become bosom buddies but you do need that mutual respect. You need to be confident your recruitment agent will secure you suitable work at maximum rate, with little or no break between contracts.

Your recruitment agent meanwhile has to have confidence in your ability to be able to fulfill the contract, whilst at the same time interacting with the end-client in a professional and businesslike manner.

Relationship No 2

The second important partnership you’ll profit from is having a good team of people sorting out your back-office. Someone to do all your paperwork, fill out forms, talk to the authorities (HMRC) and ensure you’re paid as quickly as the process will allow. Also, in order to work legitimately you must be employed by a limited company that is registered for PAYE with HM Revenue & Customs.

“You could setup your own limited company and run things yourself. It sounds grand and you can call yourself a director, but do you really want to fill in forms and complete statutory returns after a full day’s work? Most people would prefer not to – given a choice.”

Save Time, Save Worry with an Umbrella Company

The days of ‘cash in hand’ have long gone. In order to work legitimately you must be employed by a limited company that is registered for PAYE with HM Revenue and Customs.

This gives you two choices:

• Register for free with an umbrella company.

• Set up and run your Own Limited Company and accept the additional work that comes with doing it yourself.

Self employment isn’t an option for contractors.

Advantages of working through an Umbrella Company:

1. Employment Protection. An umbrella company provides employment to you in much the same way as any other business that employs staff. You have a Contract of Employment under the Employment Rights Act 1996 which grants you full employment rights & statutory protection for the time you are registered with your contractor umbrella company.

2. Overarching Contract. Your contract of employment is drawn up on the basis that you become a permanent employee of your contractor umbrella company in the expectation that you will be working for the contractor umbrella company on a number of contracts/assignments.

3. Your permanent workplace will normally be your home which you will use as a base to complete your paperwork, search for new contracts, and travel to the various temporary workplaces that you need to attend to fulfill your contract.

4. You are able to claim business travel (which covers: mileage, subsistence & accommodation) from home to your temporary workplace(s).

5. Insurance. As an employee of an umbrella company you are normally covered by the contractor umbrella company’s group insurance cover (employers’ liability, ,and public liability & sometimes professional indemnity liability).

6. Paperwork. The real advantage of working for an umbrella company is they provide a simple means of employment for those who don’t want the hassle and burdens of running their own limited company. Your umbrella company looks after all the day-to-day administration:

• Contracts

• Assignments

• Invoicing

• Credit control

• Expenses

• Payroll

• All statutory matters from company law to PAYE; from employment law to IR35; and, from national minimum wage compliance to the working time directive.

7. Peace of Mind. Umbrella companies offer a proven, compliant and comprehensive service which will be supported by a team of taxation, HR, legal, accounting, administrative and customer support staff.

Here’s an Umbrella Company Process Overview:

• You become an employee of your umbrella company

• The umbrella company provides you with full employment rights through an overarching contract of employment

• You’ll be expected to remain an employee of the umbrella company and work on successive assignments with them

• The umbrella company take full responsibility for, PAYE, National Insurance payments, VAT, and all corporate and statutory reporting

• The contracts (or assignments) for your services are entered into by the umbrella company and they take responsibility for all contractual matters

• Between contracts your umbrella company should support you in getting new contracts.

Jim Goddard concludes: “Getting Started with an Umbrella Company is straightforward. Once you have discussed your contract with the recruitment agent:

1. The umbrella company contacts your recruitment agency/client and enters into a contract on your behalf for your services

2. The umbrella company will send you a contract, and details of your assignment

3. You sign and return any forms, and give the umbrella company your P45

4. The umbrella company will give you a call to make sure you understand everything that’s going on.