Umbrella payroll companies have become the stress-free preference for many businesses and agencies around the UK. Among changing tax laws and a growing environment of freelance workers and contractors, there is a greater call for simplified and reliable payroll systems. You may have heard of both umbrella payroll and companies before but still be unaware of exactly how they work.
It is surprisingly simple. Umbrella payroll is a form of outsourced employment that mitigates the payroll from a business or agency, invoicing the employer and paying the contractor while also dealing with necessary tax obligations through PAYE.
As a contractor or freelance worker, joining an umbrella company means becoming an employee. You are given a contract, as well as the benefits, that an employee would have in a permanent position, as the payroll company acts as a mediator for the hiring employer.
In recent years, umbrella payroll has grown in popularity. This is in part due to the stress and risk of internal PAYE, which, during an error, can lead to significant costs. Other factors, such as the introduction of IR35, as well as its upcoming expansion in April 2021, have lead employers and agencies to seek simpler alternatives that diffuse any risk and frustration.
As a contractor, there are numerous ways in which seeking reputable options, such as umbrella payroll from People Group Services, would be beneficial. It is far less work than setting up your own limited company and offers the benefits of employment coupled with the flexibility of your contracted work.
Additionally, it negates the complications involved with multiple agency work. Instead of receiving numerous paychecks and managing various tax obligations, your work and paycheck are consolidated into one. This means that you will also be able to unify your pension scheme too as you will only have a single employer, an employer who will connect multiple agencies together for you.
Furthermore, there are certain expenses that you may be able to claim depending on your work. To ensure that contractors are aware of their entitled benefits, as well as comfortable in their employment status, most umbrella companies have dedicated support services and call lines.
Due to the British government imposing greater restrictions on limited companies alongside decreased tax breaks, it is becoming less financially viable for contractors to continue as they are. Umbrella companies, which typically have working relationships with various agencies, will be fully compliant when dealing with HMRC and have the resources to ensure regular, prompt, and correct payments are made to their contractors.
If you are one of the growing numbers of people working as a freelancer or contractors, choosing a suitable umbrella company will be far more secure for your employment. The majority of contractors do not have any way to provide themselves sick or maternity leave, which is a comfort that those under umbrella payroll are able to enjoy.
When considering umbrella payroll options, be sure to spend time discussing your options with individual companies. They will walk you through the process as well as answer any further questions you might have about how umbrella payroll works and the benefits you’re entitled to.