People on fixed term contracts or tasks, often through an employment agency may find benefits with having umbrella services. Umbrella Companies act as employers to people working on fixed term contract projects or activities. The term “Umbrella Company” comes from the fact that the company employs many different kinds of independent contractors brought together as a legal entity under the “umbrella” of one company. This legal entity then provides employment services for contractors by making sure that all legal tax and accounting requirements are met.
Benefits of umbrella companies
• A relatively easy way of managing contract work – the umbrella company works quickly to set up the services
• Umbrella companies benefit contractors on short term contracts or low hourly rates
• The umbrella company does the invoicing and administration, follows up payment and manages the contractor’s payroll. That is PAYE and National Insurance are calculated and deducted off the gross before payment is made, so reducing worries about tax payments
• Umbrella companies benefit those that are only temporarily undertaking contract work, or for those who are just starting and seeing how work as a contractor suits them.
• The one thing left for the contractor to do with his or her admin is to see that the umbrella company gets time sheets and expense receipts forwarded to them.
• It is worth freelancers and contractors looking into the benefits for them of umbrella services.