An umbrella company is a business that acts as an employer to temp workers, agency staff and contractors on a fixed-term job, they often work through the business as recruitment agencies. In the United Kingdom, these businesses will draw up contracts and offer them to a limited company – thus reducing the need for the agency to have liability.
A typical example of an umbrella company is Churchill Knight and Associates, which acts as an independent professional, and offers two payroll options, where a business can act through its own limited company or use the umbrella company instead.
If you choose to use an umbrella company for paying wages you will find it is the easiest option. Signing up is simple. Usually there are no membership signing up fees and no penalties for leaving.
If you sign up – as a contractor or temporary staff worker – you will become its employee and your salary will be paid via the PAYE scheme. There is no need to worry about paying tax and National Insurance as the umbrella company will deduct all this for you. Which means no worrying about returning your annual tax returns every year and making sure they are delivered on time to avoid that penalty.
All agency workers, temps and contractors who opt to go under an umbrella company will receive pay slips on payday just like any other employee. A full read out of how much you have earned with tax and NI payments will be itemised on the payslip.
Administration work for contractors is minimal – allowing the agency worker or temp to get on with the job in hand. You would be expected to get your timesheet signed by a supervisor or manager, and if you are claiming any expenses, such as petrol, lunch, hotel, travel or clothing expenditure, the expense claim forms must be signed off and delivered to the umbrella company so payment can be verified and submitted.
You can also enjoy all the benefits of being an employee working full time at a company; this includes things like SSP (Statutory Sick Pay), Maternity/ Paternity Pay and Annual Holiday Entitlement).
The umbrella company acts as a dedicated point of contact, so if you have a payroll issue or tax question, a quick call to the representative with the agency should resolve any issues with one simple phone call or email.