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If you’re fed up with permanent employment you may find contracting attractive: contractors and freelancers tend to attract better pay rates, they have a degree of flexibility over how much and when they work, and have the opportunity to accumulate skills and experience at a much faster rate than traditional employees. Maybe you just don’t want to go to any more tedious office parties. Whatever the reasons behind your choice to look at working as a contractor, there are several things you should consider:

Existing skills & experience

It’s unlikely you’ll be able to start contracting without at least some prior experience in a permanent role. This of course depends on your target role, and your qualifications. Be realistic, and consider how attractive your current CV would look to a potential employer. Many contract roles are project-based and you may find that you need to adapt your skills and experience into a slightly different type of role. Project management methodologies such as PRINCE2 and Six Sigma are highly prized in the contract world.

Create a contractor-specific CV

Contract recruiters see a LOT of CVs. Tailor your CV towards contract recruiters. Begin with a targeted profile of up to four lines that best describes you, your job title, your experience and what you are looking for. Then list your skills, experience and career history. Customise each CV towards the role you are applying for, highlighting the most relevant skills and experience. Make the CV as easy as possible for a rushed recruiter to process.

Engage with agencies and networks

Most contract work is sourced via recruitment agencies, and even more so in the case of first-time contractors. Create a generic CV that covers all of your skills and experience and upload it to contractor-specific job boards and CV libraries. Take advantage of professional networks such as LinkedIn to get your name out there and find useful contacts.

Applying for jobs

In addition to publishing your generic CV, you should look at the roles being advertised on contractor job boards and recruitment agency websites and identify roles that would suit your skills and experience. Tailor your CV to each role, highlighting the most relevant attributes, and apply via email, making things as easy as possible for the recruitment agent: list the job title and any reference numbers in the subject of the email, attach the CV and write a brief note in the body of the email clearly stating which job you are applying for, where you saw it advertised, your key strengths, and your availability. If the job advert asks for a certain skill set, make sure you include it. Always give your contact details in the email body as well as at the top of your CV. Make notes of what you have applied for and when, to avoid sending duplicate applications and to allow you to plan follow-ups.

Follow-up applications

There is fierce competition for contract roles and recruiters are typically flooded with applications. After sending your CV via email, if you haven’t heard anything back within a day or two, follow-up the application with a phone call – it may help to get you shortlisted for interview.

Secure the interview

Getting an interview is a big step towards securing a contract role – ensure that any initial negotiations are focused on confirming the interview before trying to negotiate the rate.

The interview process

Contract interviews are different to interviews for permanent roles – they are more of a sales pitch by the contractor. Investigate sales and closing techniques in order to be able to control the interview and close the deal, leaving the interview with a firm job offer. Bear in mind that second interviews are rare for contract roles, so take advantage of your time with the client to ask plenty of questions about the role and what exactly will be required. If you are fortunate enough to receive an offer, make sure you tell your agent afterwards – they will be as pleased as you – to arrange the paperwork and next steps.

Limited companies & umbrella companies

After receiving a job offer, your recruitment agent will likely ask you for the name of your limited company – this is because agencies don’t like to pay contractors directly, they insist on paying your fee to a separate limited company, mainly for tax reasons. Many contractors incorporate their own companies for this purpose, giving them some flexibility over how to process the company profits. However, if you are new to contracting and already in receipt of a job offer, you may not have time to set up a company and then acquire a company bank account and professional insurances. First-time contractors may find it easier to use an “umbrella company”, which is essentially a payroll company that will handing all invoicing, tax and payments on your behalf.

Due to UK tax and employment regulations, when working as an independent contractor, you will need to get paid via a separate limited company.

Many contractors choose to incorporate their own company for this purpose, affording them flexibility over how to treat the company profits, provided they are not caught by IR35 or the MSC legislation.

This flexibility can increase tax efficiency, which may offset the associated costs of running a company, which are principally incorporation costs, banking fees, professional insurance premiums and accountancy fees. The company will also be liable to corporation tax on its net profits.

Accountancy fees, therefore, are a key variable in the overall cost of running a limited company for contractors. Many contractors will seek to minimise this cost by searching for an accountant with the lowest fees, however, this may be a false economy, and could even create a compliance risk.

We have compiled this list of key factors for contractors to consider when choosing an accountant:

Bottom Line

Your accountant should help you to maximise the myriad tax allowances and benefits available to limited companies, however a cheap accountant may not be able to dedicate enough time and attention to this. Look for an accountant that offers a consultative service and when selecting an accountant, ask them to draw up a financial illustration for you that shows you how much net payment you will eventually receive and compare each accountant on this net figure – and not their fees alone.

A more expensive accountant may actually be able you to retain more funds, thus offsetting their higher cost, which could include any legal operations they can think of trying to improve.

Chartered Status

By law anyone can call themselves an accountant. A chartered accountant, on the other hand, is an accountant that has passed professional exams set by a professional body (in the UK these are the ICAEW or ACCA), requiring at least three years in-depth training and study, and is committed to keeping their skills up to date. Chartered accountants are also expected to adhere to a rigorous code of ethics and are subject to disciplinary proceedings from their respective professional body should they act incorrectly without experience. They are also required to hold professional indemnity insurance. In short, chartered status is a highly prized badge of distinction that means you can have confidence that a chartered accountant will have the necessary skills to always act in your best interests. Non-chartered accountants may be cheaper, but should you opt for a non-chartered accountant, you may wish to conduct due diligence and/or seek recommendations.

Compliance

Of the various regulations affecting contractors, there is one that specifically limits the level of support that your accountant can give you: the Managed Service Company (MSC) legislation. The MSC legislation was introduced to outlaw some IR35 avoidance schemes but is wide in its scope and it can potentially affect any contractor-accountant relationship. You should specifically ask any prospective accountant whether they have taken steps to ensure MSC compliance.

The MSC rules prevent accountants from:

– Holding a tax retention accountant on your behalf

– Controlling company bank accounts

– Getting involved in contract negotiations

– Holding a company office such as director or secretary

– Influencing or controlling your limited company or the provision of your services in any way

– Promising to make good any tax loss that you may incur as a result of non-compliance

– Financially benefiting on an ongoing basis (i.e. charging fees as a % of your invoices)

– Influencing the way in which payments are made to you (other than providing advice)

Compliance with the MSC rules are your responsibility as a limited company contractor and whilst an accountant may be able to offer you some guarantee of their compliance with the rules in the private sector, it is prudent to do some research on your own account to ensure that you will not fall foul of the regulations. Any MSC-caught limited company must pay its contractor in PAYE salary only, which is costly and may negate any financial benefits of operating through your own limited company.

Whether you are a UK national, or from overseas, tax and employment regulations dictate that any contractor working in the United Kingdom must get paid into a limited company, rather than directly.

Many contractors incorporate their own companies for this purpose, but running a company carries a substantial administrative burden – the director of the company must deal with all tax reporting and payments to HMRC, Companies House returns, professional insurances, and the raising of an invoice to their agency of client every time they get paid. You also need to incorporate the company and obtain a business bank account to manage this.

Contractors who don’t want the administrative overhead of running a company may instead choose to work through an umbrella company: a company that employs contractors and hires them out to agencies and end-clients. Umbrella companies are designed to be “hassle-free”: you pay the umbrella company a small fee, and the umbrella handles all invoicing, payments, HMRC and Companies House reporting, insurances, and signs the contracts with your agency or client. You become an employee of the umbrella, which pays you your fee as a PAYE salary, after deducting their charges.

The drawback of using an umbrella company is that they are not very tax-efficient: your entire rate is subject to PAYE income tax and National Insurance, and, additionally, employer’s National Insurance (currently 13.8%). However, given the higher rates that contractors command, and the ease-of-use of umbrella companies, many contractors opt to use them, considering the relatively low net return of an umbrella company to be acceptable given the considerable benefit of avoiding the paperwork of running a limited company themselves.

Setting up an umbrella company is relatively easy: you simply contact the umbrella company asking to join, and provide details of your contact at your agency or client for the umbrella to call to arrange contracts. The vast majority of umbrella companies charge a small fee which is deducted from each invoice, so there are usually no set-up charges. You will also need to provide “Know Your Customer” proofs of identity and address to comply with the Money Laundering Regulations.

The UK umbrella company market has proliferated substantially in recent years and there are now myriad providers to choose from. We have compiled this handy guide to help you avoid common pitfalls when setting up an umbrella company:

Cost

Given that the taxation treatment of contractors is the same across all umbrella companies, the only way that umbrellas can compete with each other financially is to lower their fees. However, choosing an umbrella company solely on cost could be a mistake – remember, the umbrella company will be responsible for paying you, and most contractors will expect a quality service. The range of charges in the marketplace is fairly narrow in any case.

Payment Terms

Another factor that differentiates umbrella companies is their payment terms. Which means the amount of time between you submitting a time sheet and the umbrella raising an invoice, and the amount of time it then takes the umbrella company to pay you once they have received your funds from the agency or client.

Support

Customer service can vary considerably between umbrella companies, and given the amount of payment queries that contractors tend to have, it is prudent to choose a company that will be responsive to any enquiries that you may have.

Agency Requirements

Many recruitment agencies operate Preferred Supplier Lists, or PSLs, in respect of umbrella companies. These are lists of approved umbrella companies at the agency. Before selecting an umbrella company, you should check with your recruitment agent to see whether the agency operate a PSL and how restrictive it is in normal standards.

Compliance

Umbrella companies should subject your rate to PAYE income tax and National Insurance. Although there are some legal ways of reducing your exposure to employment taxes, such as a company pension scheme, contractors should be wary of any umbrella company purporting to avoid significant amounts of tax via a tax avoidance mechanism, especially if it involves an offshore element.

Solvency

In the unlikely event that your umbrella company closes down for any reason, you may lose a payment. The most obvious cause would be if the umbrella became bankrupt. This is unlikely because umbrella companies don’t have large running costs or high financial risk exposure, however, choosing an umbrella company that has a proven track record over many years should give you more confidence that the umbrella company will remain solvent for the duration of your contract.

Contractors working in the UK will find that their agency (or client) insists on signing their contract with a limited company, and not the contractor themselves. This is to put beyond doubt that no employment relationship exists between the agency/client and contractor.

Historically, contractors and freelancers would have to set up their own company to facilitate payments and the contractual relationship with their agency/client, but setting up and running a company is far from straightforward, and some people are not eligible to be a company director.

For contractors working through their own limited company, in addition to company incorporation, setting up a business bank account, registering the company with HMRC, filing tax and Companies House returns and obtaining the necessary professional insurances, each time a contractor is due a payment, they must raise an invoice from their company. If their agency/client does not receive an invoice, payment may be withheld and liability will be an issue under certain regulations.

An umbrella company is an alternative to working through one’s own limited company in this manner. The umbrella company provides the service of being a limited company that can contract with the contractor’s agency/client and manages payments on behalf of the contractor. The contractor becomes an employee of the umbrella company, and their rate is paid to them as a PAYE salary subject to income tax and National Insurance, deducted at source and paid over to HMRC by the umbrella company.

Umbrella companies are considered a very flexible and low-admin manner of working for contractors. Many umbrella companies charge per invoice, on an “as you earn” basis, with no setup or termination fees, and umbrella companies can agree contracts at short notice whilst satisfying all agency or client requirements.

Payment queries can be quite common amongst contractors, due to complex payment terms and cut-off dates at some agencies and end-clients. Umbrella companies take charge of the payment process, raising invoices on behalf of their contractors, and paying them their net salary once the agency or client pays the invoice. If any payments are delayed, most umbrella companies will provide the service of chasing up payments for the contractors involved and informing them of when they can expect payment – a service that many contractors find invaluable.

Running a limited company as a contractor can be a compliance nightmare – there are several complex legal regulations that govern how limited companies can treat contractor payments. Working via an umbrella company, on the other hand, negates any compliance problems for contractors, who are simply employees with similar statutory protections to any other employee – their tax deductions and payments become their employer’s responsibility.

1. Build your brand

When marketing your services as a self-employed contractor, it is helpful to consider yourself a small business rather than a recruitment candidate. Building a personal brand can help to define what you do best and why you are different/better than the competition. Consider who your target market is and what will catch their attention, draw them in and engage them. Be consistent in your message – for example, small details like your Twitter and LinkedIn taglines being uniform and reflecting your CV summary help you to look professional, distinctive and could be the structure that makes you stand out in a competitive marketplace. Be clear, bold and, most of all, unique.

2. Leverage the internet

Most businesses have a web presence, and your contracting business should too. Many contractors and freelancers overlook this opportunity. Incorporating the elements from your branding, create a simple website that advertises your services with linked examples of your expertise, an online copy of your CV and clear contact details and links to your social media pages. LinkedIn is incredibly popular with contractors for networking. Make separate Twitter and Facebook accounts for your business and share links that showcase your interest in keeping your skills up-to-date. Write a blog that discusses developments in your expert field. Join bulletin boards and forums and contribute to them. Offer to write articles for industry magazines and websites. Broadcast your expertise, and then use social media to display and share your work. Ensure you will be found if your name is entered into a search engine, and that the results confirm that you are an expert in your field. Above all, always remain professional and avoid spamming.

3. Ask for referrals

Word-of-mouth remains one of the most powerful forms of marketing. Build up a network of contacts, demonstrate your value, and, when the time is right, ask if they can recommend you to potential clients. Clients are much more likely to hire contractors that have been recommended from people that they trust. Maintain relationships with your clients, and always be courteous – taking time to say thank you and telling them how much you appreciate their business can go a long way.

4. Write a killer CV

Your CV is the most important marketing weapon in your armoury – it should be of the highest possible standard. There are myriad online guides that can help you to refine your CV’s presentation. Where you are successful in securing roles, try to get feedback from the recruiter on your CV’s appearance, content and style – recruitment agents see hundreds of CVs every day and are best placed to evaluate yours. Your CV should be concise and easy for a recruiter to digest in seconds. Your skills, experience and any Unique Selling Points should be summarised on the first half of page one. The best CVs begin with a four-line profile that explains who you are (job title), what you have done (experience and what you specialise in) and what you are looking for. DO use bullet points. DON’T try to make it stand out with cheesy photos or unusual typefaces. Make individual CVs tailored to each job application and try to match the CV profile to the advertised job description, copying “buzzwords” (dynamic, team-orientated, etc) that are used in the advert, or synonyms thereof.

5. Advertise yourself

Register on the main contractor job boards for your sector/industry. For example, if you are an IT contractor, the most important sites would be:

www.jobsite.com

www.jobserve.com

www.cwjobs.co.uk

www.technojobs.co.uk

www.theitjobboard.co.uk

Upload a generic version of your CV to internet CV libraries, which are commonly used by recruiters, this way you can manage the amount of times you might receive calls. Perform basic SEO on your own website to boost your ranking in search engine results. Consider using paid advertising such as Google Adwords and email marketing services such as MailChimp. Leverage your email signature to remind anybody that you contact that you are in the market for contract roles. Broadcast your availability over social media.

6. The personal touch

With so many technical advances over the past twenty years, it’s easy to be tempted to hide behind your laptop screen – however, keep in mind the old adage: “people buy from people”, and get yourself out there – it’s much more likely that you will be remembered if you foster relationships face-to-face. Seek out seminars, networking events and informal meet-ups on social media and attend as many as you can – the relationships that you build in person can turn out to be many orders of magnitude stronger than those you form online. If the application also offers training then you should consider clicking that apply to join button as soon as possible or getting in contact with them.

In the United Kingdom, tax and employment law creates a liability risk for any company that contracts with a freelancer directly. For this reason, most recruitment agencies and clients will insist that their contractors engage them via a separate limited company. Most contractors set up their own companies to comply with this requirement, which can actually present several tax advantages.

Whether you are a freelance consultant, or simply setting up a limited company for your small business, our guide to incorporating a company for tax purposes is designed to outline the exact incorporation process and to help you to structure your profits in the most tax-efficient, compliant manner.

1. Incorporation

The UK company registrar is called Companies House, and is one of the most advanced company registrars in the world, with the ability to incorporate companies online in a matter of hours. A plethora of company formation agents exist with digital links to Company House who can facilitate the process for you. Should you choose to form your company directly with Companies House, you will need to provide the following information:

– Company Name

– Company Registered Address

– Memorandum of Association (legal document containing the conditions under which the company can operate)

– Articles of Association (legal document defining responsibilities of directors, power of shareholders and type of business)

– Names of directors and shareholders

A UK limited company only requires a minimum of one director and one shareholder, who can be the same person. Directors and shareholders can be added or removed at any time.

Draft articles and memorandum of association can be sourced online, or, if using a company formation agent, the agent can provide standardised versions of these documents that will suit the vast majority of businesses. Some formation agents can also provide a company registered address with mail forwarding.

Company names such as John Smith Consulting Ltd should be avoided because they can increase the risk of an IR35 audit.

2. Business Bank Account

Whilst incorporation is a fairly straightforward process, acquiring a bank account for your newly incorporated company can be more tricky, dependent on your credit rating and existing banking relationships. Due to the company’s limited liability, there is a risk of insolvency creating a liability for the bank, so they will likely want to see a business plan to reassure them that your business will be profitable. If you have a good relationship with your bank for personal banking, its advisable to try to get a business account from the same bank, in the first instance.

3. HMRC Registration

Your company will need to be registered for corporation tax and PAYE. The company will also need to be registered for VAT if you expect annual profits to exceed £85,000. Many contractors take advantage of the Flat Rate VAT Scheme, which offers a VAT rebate regardless of your business expenses levels and simplifies reporting, but is only available to businesses with a taxable turnover of less than £150,000.

4. Insurances

Most businesses require professional indemnity insurances in order to cover potential claims arising from negligence or errors. Contractors will find that agencies and clients insist on a certain level of cover.

5. Hire an Accountant

Unless you have an accountancy background, you will need an accountant to help you with the company books. By law, anyone can call themselves an accountant, so caution should be taken that your accountant is suitably qualified. Chartered accountant status means that the accountant has passed professional exams set by a professional body requiring at least three years’ study, and is bound by the code of ethics and disciplinary procedures of their professional body.

6. Tax Efficiency

Before implementing a tax strategy, you should check whether any contracts that the company is a party to are caught by IR35. IR35 is a tax regulation that forces certain contract receipts to be treated as employment income.

Company taxable profits can be reduced by claiming business expenses against them. The rules governing company expenses are broad and can potentially encompass any of the following:

– Accommodation whilst on business travel

– Accountancy fees

– Business Mileage

– Car, van and travel expenses

– Charitable donations

– Childcare costs

– Christmas party and staff events

– Company formation fees

– Entertainment and gifts

– Equipment

– Eyesight tests & glasses

– General office purchases

– Gifts and trivial benefits

– Medical insurance and health costs

– Pensions

– Professional subscriptions

– Salaries

– Mobile telephone, landline and broadband

– The use of your home as an office

– Travel and Subsistence

In addition, many business owners also choose to employ a non-working spouse or family member as a secretary in order to take advantage of their personal tax-free allowance.

Contractors tend to pay themselves a split of salary and dividends because dividends are subject to a lower rate of tax and are not subject to National Insurance.

Your accountant will be able to help you minimise your tax liability whilst remaining compliant with tax law. In order to achieve maximum efficiency, you should meet with your accountant regularly for consultations.

Many professionals choose to switch from permanent employment to freelance once they have acquired the requisite skills and experience to be considered an expert. Freelance consultants are often referred to as “contractors” by the HR and recruitment sectors, and typically work on projects that can last from as little as three months to several years’ duration. As a result, contractors pick up invaluable experience, working for many more companies than employees can expect to in their careers. They are also known to have more tax deducted called tax for contractors.

This breadth and depth of experience and skill set enables contractors to attract higher rates of pay than their permanently employed counterparts – but this reward comes with a higher level of financial risk: contractors are never guaranteed work, and must compete to win new contracts regularly, following the completion of projects that they are involved in.

Finding contract work is quite different to finding employed roles. Due to the higher turnover of contract staff creating a greater human resources (HR) overhead, larger companies rarely perform the recruitment process “in-house”, instead relying heavily on recruitment agencies to source contract staff. Consequentially, it is quite rare for companies to advertise directly for contract roles. Whilst it is theoretically possible to approach companies to offer one’s services as a contractor (thus cutting the recruitment agency out of the relationship), in practice this is rare and usually only possible for highly experienced contractors that leverage relationships built up over their careers. In many cases it is impossible to cut the agency out of the picture in any case, due to exclusivity clauses in their agreement with the company, and contractors that try to approach companies directly may find themselves being engaged through an agency or management consultancy anyway.

Contractors’ curricula vitae (CVs) are usually presented in a different format to those of permanent candidates and as such, professionals who wish to make the transition from permanent employment to contracting will first need to compile a new CV that is tailored towards securing contract work. Contractor’s CVs are typically short and targeted towards the individual role – there is usually a lot of competition for contract roles, and recruiters see many CVs for each role. A contractor’s CV should be as easy as possible for the recruiter to digest in the minimum possible amount of time, starting with a summary/profile of no more than four lines that tells the recruiter your job title, experience and what you are looking for. Think of the profile as an answer to the advertised job description – if the job description asks for a dynamic individual, your profile should illustrate what makes you dynamic, etc. The first page is the most important page by far and should concisely explain why the recruiter should shortlist you for interview – education and work history and any personal information such as hobbies, associations etc should be confined to the last pages. A number of online guides exist which could help you to refine your CV.

Many recruitment agencies advertise contract jobs on their websites, usually in a different section to permanent roles. A number of dedicated contract recruitment job boards also exist, some specific to various industry sectors, others more general. When you find a role that suits your skills and experience you may find you have more success by making some final adjustments to your CV to fully tailor it towards the advertised role. Email the CV to the recruitment agent with a brief covering letter in the body of the email, and if you don’t hear anything back within a few hours, follow it up with a phone call. Contract recruitment moves quickly, and a pro-active approach is essential.

If you are shortlisted for interview, ensure that you are prepared for the interview – research the office location, the client’s recent company history and if you have the name of the interviewer(s), look them up on LinkedIn. Again, interviews for contract roles are quite a different beast to interviews for permanent roles – prepare to lead the conversation, ask lots of questions and sell yourself. Treat the interview as if you are a business pitching their services to a prospective customer. If you feel like the interview is going your way, close the deal and ask for the job. Your aim should be to leave the interview with the job offered and a start date confirmed.

Once you have your first contract job offer, you will need to set up either a limited company or umbrella company in order to facilitate the contractual arrangement with the agency and get paid. Payment is almost always made from the agency, who will pay on receipt of an invoice from your limited company. Limited company contractors retain responsibility for their taxation, whereas umbrella company contractors have their income tax and National Insurance deducted at source through the PAYE regime.

A question that is understandable to be asked is how are your contributions to tax and national insurance figured out?

All umbrella companies operate a payroll system known as PAYE. Like any other employer, once you have signed up with them you will need to provide a P45, proof of address and passport. Unlike normal employers though, you will be employed under an overarching contract. Then you work within your contracted hours. It’s not rockets science at the end of the day.

When working at an umbrella company you will be provided with timesheets that you will fill out. Here you will tell the employer how much time you have spent on allocated work. At the end the umbrella company or client will pay you for the work you have completed. This also includes every cost related to your employment, like sick days, holiday pay and maternity/paternity leave. If you are paid directly by the client then you usually are paid a little bit more.

When the umbrella company has received funds from the client, the umbrella company will then take the payment and process it then, they make deductions for National Insurance, Income Tax, admin fees and pensions.

Unfortunately, you will have to pay two different types of National Insurance. These both being Employee and Employer National Insurance. They will be deducted from your pay when you get paid.

Fortunately, you will be paid a higher rate of pay to reflect these deductions.

Most contractors love working the way they do because of the flexible hours that contracting supplies. However, this does come with levels of uncertainty with this kind of work.

Finding work as a contractor can be quite simple. You can join a recruitment agency as this is usually the best way to find yourself some work. If you provide work that is up to the expectations of the client then they will provide you with new opportunities and more work.

A lot of umbrella companies offer services to help you find employment, this can be from CV writing to advertising certain work assignments.

Fortunately, there is a lot of opportunity within contracting, however, this all depends on your level of experience within the industry that you have chosen to work in. Luckily, contracting lets you take home a lot more money than if you were a permanent employee of a business. Of course, your pay will be affected by how much you work.

Something that you must be made aware of is that if you are working in a company as a temporary contractor then you can claim travel experiences. Which in turn, will give you a boost to your pay.

Of course, anyone who works for a company in the United Kingdom is entitled to holiday pay and a holiday in some form.

Like all employers’ umbrella companies have the same legal obligations as other employers, the private sector and public sector are no different in holiday pay. You will be paid all of the holiday pay acquired to you via the PAYE payroll system. This is the same for all contractors and freelancers.

Luckily for all PAYE employees you will receive at least 5.6 weeks paid holiday each year, which is a lot higher than most standards in other sectors. Some can even offer more if you have quite a few years’ experience in the job you are going for. However, you are more likely to have more obligations in your job.

If you want to work it out in days, then, you will find that this is equivalent to about 28 days paid holiday each year.

Most part time employees however, will have their holiday allowance calculated on a pro rata basis due to not working in the company as long.

Your holiday pay is usually calculated by how much work you have completed and each payslip you have sent over to the umbrella company on a weekly and monthly basis. Depending on the client of course.

At the national minimum wage, it is worked out at the following.

Weekly Invoices: 28 days per year x 7 hours per day at £7.50 per hour / 52 weeks = £28.27 holiday pay.

Monthly Invoices: 28 days per year x 7 hours per day at £7.50 per hour / 12 months = £122.50 holiday pay.

This will of course be different depending on your actual pay.

However, based on these calculations you will be paid £52.50 every holiday day you take.

If you have unused holidays then you will have to check with the company policy that your umbrella company has in regards to this. Usually, it is refunded to you either when you leave or at the end of the financial year.

As you might know, there are hundreds of umbrella companies around in the United Kingdom. Choosing the right one for you is where we at Comparison Contractor shine the best. Fill out our contact form and we will call you to have a chat about any issues you might be having as a freelancer.

So, here are some of the things you need to be on the look for when comparing companies for contractors in the United Kingdom:

Do they charge a monthly or weekly fee? – A weekly fee at its highest can be £32 a week, a monthly fee can at its highest be over £121. Of course, this can depend on your money, projects, obligations, contract you have signed and experience in some areas.

The Contractor reviews- Your fellow contractors will write reviews of the experience that they have had working with the umbrella company that you might be considering. If, their reviews are terrible then it’s a no brainer and you shouldn’t consider them as a quality company. However, if they offer you a bit more than you are already earning then you might want to consider it.

Their customer service record – If they have a great payroll turnaround then you should definitely consider them to be a better option than most.

Look at what they offer – One thing that you will need to take into account is insurance cover and the costs you might have getting form place to place. As you might already know, not every umbrella company offers the same amount of cover.

As we have mentioned in our other FAQ’s there are other things you might be need to be aware of.

Things like:

Are they IR35 compliant?

Payment schedules

Extra costs like travel expenses etc

Pensions

These are just a few things that contractors need to be aware of and should ask at the first meeting.

What is a contractor

You might be new to the game, if that is the case then you might start to get a little confused with the word “contractor” as it might be posted across our website. If you are new to this sort of thing, don’t worry as we will have you completely covered and knowledgeable by the end of this FAQ.

A contractor or in a term that you might understand, a freelancer. Is a person that is considered a professional in their own field. They usually work within umbrella companies or have founded their own limited company (which you can read about with our limited company FAQ) to work as a sort of independent individual.

If you have decided to work within an umbrella company then you will receive payment via the PAYE roll system. A large number of contractors decide to work in umbrella companies, because, setting up their own limited company can in fact be quite tiresome and requires a lot of work. Usually you don’t have to deal with matters of administration, financial taxes and so forth.

Surprisingly there are a lot of professions that use contractors for work. This is mostly because contractors have a lot more experience in these fields. A few examples of these professions would be:

Financial Sector – You might be an accountant for a company and at the weekends or in your free time you could be an account working for yourself on another company. It all depends on the individual.

IT Consultants – As well as working in an IT support company you could also help other companies for yourself on the side. There are only so many hours in the day to work for a company and if you are wanting to make some more money then this is a great way of doing it.

Medical Sector – You could be a doctor working in the NHS and then a few days a week you might switch over to private health care and work at somewhere like a Spire.

And many other different places employ contractors to do work for them, especially if they are over worked or have a huge project coming up.

You can expect contractors to have quite the expertise in the field that they choose to go in. With some working in that field for over 20 years. They have a much larger understanding of the field they work in. Think of it this way, they could be a doctor that has worked for the NHS for 15 years and then decided to become a freelancer working in the private medical profession for two to three days a week.

What we’re trying to get across is that contractors usually have a lot more years’ experience in their chosen field and are wanted by professional firms and companies across the globe. If, they have caught the eye of some with some incredible work.

There are many other reasons for employing contractors but these are just a few to say the least. You can find many other reasons as to why within our other FAQ’s within our page which you are reading through right now.

Feel free to browse through our other pages if you would like some more information about contracting in the United Kingdom. These can be the benefits to the problems that first-time contractors might face when it comes to first time contracting in the United Kingdom.

We have a number of different FAQ’s that might peak your fancy when it comes to contracting. All you have to do is browse and read through them at your leisure.