Should I use an Umbrella Company?

(3 minutes to read)

There are a few different ways that you can join the flexible-working sector, it’s just a case of working out the best method for you, whether that’s via an umbrella, limited company or as a sole trader.

Who should use an umbrella company?

For most people, the umbrella company route is the most appealing out of all of them, especially for those who have just left permanent employment and want to work flexibly without the hassle.

It’s ideal for those who want more flexibility with a better work-life balance, but don’t want to deal with the admin headache that comes with being a limited company contractor or sole trader.

How can umbrella companies benefit contractors?

As mentioned, increased flexibility, a better work-life balance and not having to worry about the administrative side of things are great reasons as to why you should use an umbrella company – here are a few more benefits:

Higher rates of pay

Being self-employed means that you have the freedom to pick and choose the contracts you want to take on and decide when you want to work, as well as this, contractors will often be paid a higher daily/weekly/monthly rate compared to those working as a permanent employee.

For more information on how you’ll get paid, you can read our Using an Umbrella Company – Who Pays Me? Page.

Entitled to employee benefits

As an umbrella company contractor, you are seen as the umbrella company’s employee, meaning that you’ll have standard employee benefits.

So, unlike sole traders and limited company directors, you are entitled to statutory maternity/paternity and sick pay, as well as annual leave, which will be calculated based on the hours you work.

Not having to worry about IR35

IR35 is a legislation that impacts the amount of tax and NICs you pay and whether you are able to claim back on expenses. You either fall ‘inside’ or ‘outside’ of the legislation with the defining factors based on your level of risk, liability and responsibility as a worker.

It’s a legislation that is often criticised due to its complexity and how difficult it can be to determine a contractor’s status.

However, as an umbrella company contractor this is thankfully something that you don’t need to worry about due to you being treated the same as a permanent employee.

If you want to read more about IR35, visit our page IR35 and Umbrella Company Contractors.

Is an umbrella company necessary?

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.

This most certainly makes it a necessity for those who want self-employment benefits with a bit more security and less hassle; it’s also a great solution for those working on short-term contracts.

Hopefully this page has answered some of your questions regarding umbrella company employment – if you have any more queries contact our team of experts on 01206 591 000 or email

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