What is an umbrella company?

Tens of thousands of contractors enjoy the benefits of being employed by an umbrella company like Umbrella Plus. In this article, we seek to answer the question: “What is an umbrella company?” to help you determine whether it’s the right working option for you.

Working as a contractor – your options

For contractors, there are usually four working options available:

• Become an employee of an umbrella company.
• Set up your own business by forming a limited company (Personal Service Company). If you are a public sector contractor this may not be an option due to off payroll working rules.
• Work as a self-employed sole trader.
• Work through agency payroll (ie get paid by an employment agency).

There are benefits and matters of consideration with each option. The right choice will depend upon a number of factors, including:

• What type of organisation you are contracted to – public or private sector
• Your personal circumstances including your anticipated pay rate.
• How much responsibility you want to take and the level of risk you are comfortable with.
• Whether you intend to work for yourself in the long-term and how long your contracts typically last.
• What set-up costs you’re willing to incur and the administrative burden you wish to accept.
• Whether the contract you’re undertaking involves you working under Supervision, Direction or Control (SDC) or falls inside or outside IR35 – both will fundamentally affect your tax position.

The role of an umbrella company

The purpose of an umbrella company is to provide a payment solution for contractors.

It involves becoming an employee of a company which then sub-contracts out your services to an employment agency.

You maintain the flexibility which comes from working as a contractor by continuing to source the contracts you want to fulfil while the umbrella company will process your pay, tax and other deductions. Importantly, an umbrella company can provide you with continuity of employment (important if you need to seek a loan such as a mortgage), complete with all statutory rights and benefits of an employee.

How does an umbrella company work?

Our umbrella company for contractors, Umbrella Plus, will calculate your pay after making the necessary deductions such as income tax and National Insurance. You will also receive all employee benefits whilst still retaining flexibility regarding which assignments you accept.

Why use an umbrella company?

• You would be entitled to all employment rights including all statutory rights and benefits such as holiday pay, maternity, paternity, sick leave, pension etc.
• Employment history whilst working on a variety of assignments (important in securing access to finance, housing/mortgages etc)
• Consolidates your earnings (potentially from multiple assignments for different end hirers) providing peace of mind that appropriate taxes and other deductions eg student loans, are paid – you simply submit time-sheets to your agency.
• HR support in the unlikely event that you need HR advice to handle employment issues such as raise a grievance.
• Ability to claim travel expenses, where appropriate. This is dependent upon the outcome of checks to assess levels of Supervision, Direction and Control and whether you qualify as a multisite* worker. *As a multisite worker, expenses can be paid tax-free if the employee works at temporary workplaces, for the same end client, as part of the same project engagement.
• Ease of use – you simply submit time-sheets and expenses (where applicable).
• Insurance – Crest Plus provides personal accident insurance as part of our service. Other umbrella companies may charge an additional fee.

Why choose Crest Plus as your umbrella company?

• Peace of mind. Crest Plus is one of the UK’s longest established Umbrella companies. Over 350,000 contractors have trusted us to pay them over the last 20 years.
• Fast set-up to allow you to begin contracting without delay.
• No set-up fees or minimum tie-in period.
• Advice and support from our dedicated, experienced, friendly relationship team.
• SMS messages confirming our receipt of your hours.
• Online Portal – 24/7 expenses submission and ability to view payslips.
• Payment is made promptly Crest Plus will send a text to notify you when payment has been made.
• Insurance – as part of the service you would be covered by Crest Plus’s personal accident insurance.

About Crest Plus

Crest Plus is one of the UK’s longest-established specialist contractor accountancy firms, with almost 20 years’ experience in supporting 350,000+ contractors in a range of industries, from construction to healthcare.

The company provides all the accountancy services required by contractors, whether operating through Crest Plus’s umbrella company, Umbrella Plus; a limited company or through the Construction Industry Scheme (CIS).

Reliability, excellent customer service and attention to detail lie at the heart of the Crest Plus approach. The team is proactive in helping contractors with all aspects of compliance and finance throughout the year.

What to do next

A member of our team of specialist contractor accountants will be pleased to help you decide if an umbrella company is right for you.  Get in touch on 01244 684700 or complete the form below and we will contact you.

You can find out more about Umbrella Plus or download the Crest Plus Guide to Successful Contracting.