How does our company umbrella operate?

A lot of people ask how does our company umbrella operate? Sufficed to say it isn’t an umbrella that you take out in the rain it is a system that is used to employ contractors, freelancers etc to work with us on jobs, contracts and general work. Unlike most employers a company umbrella is the kind of employer that signs contracts with freelancers, contractors etc to work on certain projects of interest with them for higher rates of pay. The reason why they receive higher rates of pay is because they have been in that field of expertise for 10+ years or more.

How does using a company umbrella work?

Company umbrella

If you’re a freelancer or contractor and this is your first time using a company umbrella then we have the answers for you. You start off by signing a time sheet every time you complete your work and how long it takes you all together. The contractor would then email their time sheet to the company umbrella, after this the company umbrella would then send an invoice to the client to request payment, then the client pays and the company umbrella will deduct your tax necessary and then you shall receive your payment. So, that is roughly how it works and it goes like that in a circle.

To be more in-depth we have created a step by step system of how it works below:

  1. The company umbrella will enter into a business contract with the employment agency.
  2. As a contractor, they will sign a contract of employment directly with the company umbrella.
  3. They will be completing assignments for the client, who will sign a timesheet for the company umbrella to confirm how many days/hours you have worked.
  4. They will be responsible for sending the timesheet to the company umbrella as well as submitting a copy to the client.
  5. The umbrella company will invoice the agency for the hours that you have worked at the agreed charge out rate plus any agreed reimbursable expenses that you may have incurred.
  6. The company umbrella will, in turn, invoice the client about the work and expenses.
  7. The company umbrella is paid by the client.
  8. The umbrella company receives the payment from the client, including any expenses. The company umbrella will retain an agreed margin from the invoice value and deduct tax and National Insurance before paying the contractor their just pay. The contractor will receive their payslip detailing the deductions which have been made to their pay, just as you would if you were in any other sort of employment.
  9. The money the contractor receives in their bank account is their money, there will be no need to make any deductions for taxes from this, as with any employment, the employer will have taken care of this for the contractor or freelancer in question.

As a contractor, should you use a company umbrella?

At the end of the day, it is your choice whether you go with a company umbrella or not. However, if the above does seem appealing to you then let us talk a bit about some more positives you will find when working with a company umbrella. Not only will you have you tax and contributions done for you through a company umbrella, but that will also reduce the need to do it and therefore reduce stress.

You can concentrate on the work in front of you instead of worrying about other burdens that come with being a contractor as an umbrella company takes that away from you. Of course, there is a small admin fee with this but with less stress and the opportunity to gain a lot more, we imagine you will hardly notice this admin fee.

One of the many reasons why a contractor might flock towards is due to the IR35 private sector reforms introduced by the government.  When the reforms have passed through parliament, we will see that the responsibility for determining IR35 will fall under the jurisdiction of contractors whose assignments are within IR35 as well as the individual who is hiring a contractor for work, they need to be done.

umbrella companies

Get in touch with us here at Comparison Contractor today!

If you are a contractor that is in need of a company umbrella then why not give us a try? At the end of the day, we want what is best for you and your career which means you can get in touch with us by filling out one of the many forms on our website. After this one of our extremely helpful team will give you a call back within a few minutes and you can discuss whatever you wish with our team.