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When you decide to join an umbrella company, it becomes your employer.
The umbrella company invoices the agency or end client and the agency or end client pays the money direct to the umbrella company.
The umbrella company will then deduct PAYE and National Insurance contributions before paying you your wage.
An umbrella company is ideal for short term contracts or your first foray into the world of contracting. Staying with the same umbrella gives you a continuous employment record and the right to statutory employment benefits.
Yes, as well as being entitled to holiday pay, if necessary, you can claim Statutory Sick Pay. You will also be entitled to Statutory Maternity or Paternity Pay as appropriate. The National Insurance Contributions you make will help secure other state benefits including the State Retirement Pension.
All umbrella companies must comply with tax and employment laws. An independent organisation – the FCSA (Freelancer & Contractor Services Association) accredits compliant umbrella companies and promotes best practice.
The best umbrella will be the one which suits you best. Look for one with accreditation and check the feedback which other contractors have given it. Are the customer service team easy to contact and do they appear knowledgeable and have they answered any questions to your satisfaction? Only if you feel comfortable with your prospective umbrella should you go ahead and sign up.
If you’re in the process of deciding whether to work through an umbrella or limited company, the choice will be influenced by whether your contract falls inside or outside IR35. In this video, we’ll give you a breakdown of the things you’ll need to consider for both options.
What are the advantages and disadvantages of using an umbrella company?Let's weigh up the pros and cons
Maggie recently decided to enter the world of contracting and found that her role fell inside IR35, meaning she had the choice of agency payroll or an umbrella company. Maggie chose the umbrella company route and decided to work through PayStream’s My Max umbrella service. We asked her how she found the set-up process and how life has changed since becoming an umbrella contractor.Download the case study
Have another question for us?Read our umbrella company FAQs