Is Operating Through an Umbrella Company Right For You ?

Is Operating Through an Umbrella Company Right For You ?

Apr 06, 2017

Is an umbrella company right for you?

If you’re a contractor operating through your own limited company and serving clients in the public sector, such as the NHS and Local Authority services, you will need to consider switching to an umbrella company.

This is because new rules mean that income tax and National Insurance are now going to be deducted at source before your limited company gets paid, resulting in higher deductions and less take home pay.

There are a number of options open to you – these will depend upon the nature of your work, your income and your personal preferences – but it’s likely that joining an umbrella company will become the most financially advantageous way to work.

Your working options are detailed in our Guide to Successful Contracting with Crest Plus but in this article, we look closely at key considerations when joining an umbrella company like Umbrella Plus.

How do umbrella companies work?

Umbrella companies, like Umbrella Plus, are your employer while you fulfil your contract role(s) to another company. You report to the company where you perform your specific assignment.
So, in the case of an NHS Nurse. You choose your Umbrella Company and perform your assignments still reporting to the NHS trust(s) where you carry out your work. Your Umbrella Company covers any variety of assignments enabling you to source your work through a number of recruitment agencies.
The Umbrella company receive payment for the work you have carried out on behalf of the NHS and applies deductions relevant to your employment status. Your pay is then calculated and paid to you.

Why join an umbrella company?

Being an employee of an umbrella company entitles you to a number of employee benefits such as holiday pay, statutory payments and the right to a pension. ‘Employee’ benefits and payment rates are different to those you would be entitled to under an agency payroll working arrangement. For example, you would not be entitled to a company pension and your hourly rate will be lower.
As an umbrella employee of Crest Plus you would be covered by our public liability, personal accident and professional indemnity insurance.

  • It’s simple – you simply submit time-sheets and expenses (where applicable). Your tax, NI and any other lawful deductions (e.g. repayment of student loans, child support orders) will be calculated by the umbrella company.
  • You get paid on time – we will send a text to notify you when payment has been made.
  • You are entitled to employment benefits – as an ‘employee’ you are entitled to holiday pay, sick pay, maternity pay, paternity pay, adoption pay and pension provision.
  • Insurance is included – you would be covered by Crest Plus’s personal accident insurance.
  • It gives you security – you have peace of mind that under the Agency Workers Regulations 2010 that should an end client fail to pay, Umbrella Plus still has to pay you for work done.
  • Flexibility – umbrella employees enjoy a smooth transition between contracts.
  • Continuous employment – umbrella employment is classed as ‘continuous employment’ which is beneficial if you need to apply for a mortgage or other type of loan.
  • You may be able to claim expenses – One of the advantages of working through an Umbrella company is the ability to claim and be reimbursed for legitimate professional costs and expenses, as long as they have been incurred during an assignment. The type 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 and control (SDC).

What to do next

Please get in touch with us today on 01244 684700 or [email protected] and we will provide you with a detailed illustration of your take-home pay. We will be happy to answer any questions you may have about working through an umbrella company.

Read our Guide to Successful Contracting. More details about the new rules which affect public sector contractors can be found here.

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