FOR CONTRACTORS
UMBRELLA PAYE
UMBRELLA SOLUTIONS
Getting paid as a Contractor
For contractors, the most straightforward payment method is to operate under an umbrella company. Signing up with an umbrella company is swift and uncomplicated; upon registration, you become an employee of the company instantly. This payroll solution eliminates the need to establish your own business or handle any administrative tasks apart from submitting timesheets. Your umbrella payroll provider takes care of all your tax responsibilities, including income tax and National Insurance, relieving you of these concerns. Additionally, IR35 laws are not applicable under this option, further simplifying matters.
How Does an Umbrella Company Work?
STEP 1
After securing a contract role, the umbrella company (acting as your 'employer') enters into a contract with your recruitment agency.
STEP 3
Once you finish a prearranged time period, you fill out a timesheet and present it to your manager for signature, then submit it to both your recruitment agency and the umbrella company.
STEP 2
You will also sign a contract of employment with the umbrella.
STEP 4
The umbrella company will send an invoice to the recruitment agency, which then invoices the end-client.
STEP 5
After receiving payment from the agency, the umbrella company processes your payroll and disburses your salary. This payment includes deductions for employment taxes, the previously agreed umbrella fee/margin, personal taxes, and pension contributions (if applicable)
Using an umbrella company offers several advantages, including swift setup and the provision of statutory benefits such as sick pay, holiday pay, and employment protection. This provides contractors with a rapid and efficient payment process, along with some degree of employment security. However, perhaps the most significant benefit of contracting through an umbrella company, and a key factor contributing to their growing popularity, is the complete elimination of IR35 risk.
OTHER SOLUTIONS
Understand your payment choices
Contractors operate within two primary payroll frameworks – umbrella companies and limited companies. Each has its pros and cons, but a contractor's unique situation typically determines which one provides more benefits. Factors like evolving legislation and the duration and value of a contractor's usual assignments must be considered when selecting between payroll structures.
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