How does an umbrella company work?
As an umbrella company contractor, you are employed by your umbrella company.
An umbrella company is essentially the middle man between the contractor and their client; the umbrella employs a temporary worker on behalf of an employment agency and the agency will then provide the services of the worker to their clients.
A contractor will still need to find their own work – it’s not up to the umbrella company to find the clients, just to deal with the admin side of things.
Read our Benefits of using an Umbrella Company page for more information on the advantages that come with the umbrella route.
How do you get paid through an umbrella company?
The umbrella company will provide you with a payslip – they will pay you for the work you complete for an employment agency’s client and will deduct any income tax or National Insurance Contributions (NICs) due, as well as administration costs.
Your payslip will include your contract pay, the number of hours you’ve worked and the amount of deductions.
I’ve found work abroad, what is the 183-day rule and how does it affect me?
If you’re given the opportunity to work abroad then, as an umbrella company contractor, the 183-day rule will apply to you.
This means that those carrying out work in a foreign country for less than 183 days won’t need to become tax residents and therefore won’t need to pay any of the taxes of that country.
So, by taking on an overseas contract within this timeframe, your pay will be subject to UK Income tax and National Insurance.
It is worth remembering that taking on a contract abroad will affect the amount that you are paid due to exchange rate fluctuations – your pay will be automatically exchanged into GBP by your umbrella company.
Choosing the best umbrella company
You need to know that you’re in the right hands when it comes to your umbrella company – ensuring that you are given the correct legal advice on all areas (such as the 183-day rule).
There are a lot of factors to take into consideration when choosing a good umbrella company and so it’s vital to do you research.
Here are a few things to look out for:
- Do they have good reviews and testimonials?
Look at reviews to get an idea of what people really think of the umbrella company you’re thinking of working through. - Do they provide a personal service?
Having a go-to person who deals with all of your work is so important for a hassle-free umbrella experience. - Have they been in business for a long time?
Experience is key with any business, giving you peace of mind that they know what they’re doing. - Do they have any awards?
Recognition for the work they do is always a comforting factor when it comes to choosing the best umbrella company – make sure that their awards are fairly recent too.
For more information choosing an umbrella company, read our Best Umbrella Company page.
If you’d like to sign up or need any further information on working through an umbrella company, please call one our friendly experts on 01206 591 000 or email Jaime at jaime.thorpe@contractorumbrella.com.
