When becoming a contractor for the first time, it can be a daunting prospect for most as there are considerable levels of risk involved with leaving full-time employment and all of the security that comes with it.
There are some major advantages to becoming a contractor over working as a full or part-time employee, such as:
– Ability to pick and choose work
– Variety of work
– Income levels
– Financial structure
Most people who are looking to explore the world of contract work will start out by using the services of an umbrella company to help with their new company accounts. This enables you to take on the new type of working without the commitment of becoming a limited company yourself, which can be costly and time-consuming to begin with.
What is an Umbrella Company?
This type of company is generally a specialist for contract workers who will also in most cases offer both types of operating structures, Umbrella and Limited. The main differences are the simple fact that the Umbrella acts as an agency more or less, thus will be responsible for everything from payroll, to dealing with your employer for timesheets etc.
You will also have a contract of employment with your Umbrella Company, which will outline the standard statuary rights of an employee. This is a lower risk way to get in to contract work without the risks of setting up your own limited company.
How do I use an Umbrella Company?
One of the main advantages of agreeing to a new contract using an Umbrella Company is the ability to start work almost immediately, which can be vital when you have a new contract to fulfil. The steps to getting started with a new Umbrella Company are simple and generally fast, such as:
- Select your Umbrella Company
- Provide details to your agency
- Check and sign contract
- Provide required information (e.g. Bank details, tax codes etc.)
You must always thoroughly check any paperwork or terms and conditions before you agree to sign any documentation to ensure that you are happy with any contractual agreement.
Why should I use an Umbrella Company?
There are several key advantages to working with and using the services of an Umbrella Company which are:
– No commitment of setting up your own limited company
– Can be easier to not have to deal with your own accounts, payroll, tax returns etc.
– Someone with multiple shorter-term contracts will not have to commit to setting up a Limited Company
An Umbrella Company will technically become the employer for the contractors working with them. This means that your pay will be processed through the main company as with a standard employer which will include an element of holiday pay, tax payments and charges for using the Umbrella Company services.
How to choose an Umbrella Company?
When you start out as a new contract worker and start to speak to different agencies, you will generally find that they will recommend Contractor Umbrella Companies for you to work with. These companies will often be selected because of the quality of the work that they do and the simplicity of how they operate.
Similarly, to employers having a panel of preferred suppliers for recruiters, agencies will also generally have a similar list of Umbrella Companies that they work with. If you are recommended to work with a particular Contractor Umbrella Company, then you should always ask why they have been recommended.
Several of the key aspects of choosing an Umbrella Company are:
– How quickly you get paid
– What do they charge for their services
– Do they have the right experience and expertise?
– Is the service tax compliant?
One of the most important factors for anyone looking to set up as a new contractor and select an Umbrella Company to work with are ‘fees’. You should be aware of and comfortable with all the fees before you agree to start to work with a new Umbrella Company so investigate thoroughly at the beginning.
Gorilla Accounting is a specialist in working with contract workers and we offer a full range of services specially designed for you, which includes our Umbrella Company, Gorilla Umbrella. For more information about our Umbrella Company, you can call us to speak to one of our team of experts.