What is an umbrella company?

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When you first embark on your contracting journey, we understand that the choices available to you may seem daunting at first.

One of the first key decisions you’ll have to make is what path your career will take. Will you form a limited company or join an umbrella? Don’t worry, all will become clear!

Many first-time contractors view the umbrella option as the easiest way to go, while some people are just guided towards umbrellas by their agency – without really knowing too much about it. To help clear things up, we’ve created this handy guide.

What does it involve?

Contractors who join a compliant umbrella company are given a contract of employment, making them an employee of the business.

Why will this benefit me?

Joining a compliant umbrella company gives contractors the best of both worlds, providing them with the flexibility to work on assignment, while enjoying the same rights and benefits given to permanent employees. These include guaranteed hours of work, holiday pay, sick pay, maternity/paternity pay and access to a workplace pension – all that’s needed for added peace of mind.

What’s more, you will be able to claim legitimate business costs and expenses – as long as they’re incurred during an assignment. The types of costs and expenses that can be claimed and reimbursed are dependent on the type of assignment you’re working on and whether it’s subject to supervision, direction or control (SDC).

How does it work?

The umbrella company will pay the worker, having deducted Pay As You Earn (PAYE) income tax and National Insurance Contributions. It will also retain a margin to cover its costs and issue a payslip.

A contractor is paid after submitting timesheets, which are normally countersigned by the client. The umbrella company will use this information to bill the client for the work carried out. Payment will then be forwarded to the contractor, minus deductions – making the process as hassle-free as possible.

How do I choose?

If you decide to go down the umbrella route, the next step is to choose the right company to work with. While there are many different options, we understand that picking the one that supports you all the way throughout the assignment is key.

Why choose Parasol?

We understand that new contractors have a million and one things to think about. That’s why we’ll strive to make your life as hassle-free as possible.

We offer unrivalled levels of support and are always on hand to answer any queries you may have, and promise to be “with you all the way”.

Our clever online portal, MyParasol, lets contractors submit timesheets, claim and log expenses and keep track of assignments – all in one place. After all, we know you’re not 9-5, and neither are we.

In addition, we also provide employees with industry-leading insurance, including Professional Indemnity, Employers’ Liability and Public Liability should you need it.

Hopefully, this has given you a better idea about what an umbrella company does. If you require further assistance, or would like more personalised advice about what Parasol can do for you, please call 0800 458 0818 or email enquiry@parasolgroup.co.uk.

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