So, you’ve taken the plunge into contracting and now you need to get your employment affairs in order. You’ll likely be applying for lots of different assignments that meet your skill set, and (if you’ve done your homework) you’ll know that the way you’re able to operate/be paid is not your choice, it’s dictated by a little thing called IR35, which needs careful consideration from the party requesting your services. If certain conditions are true of the assignment parameters then you may be found “inside IR35” this means you cannot operate via your PSC, you’ll need to be in an employed position. Here’s the predicament, the end-client doesn’t want to employ you for such a temporary role, your recruitment agency may not have payroll functionality, and you can’t work for yourself – so what’s left?
*Cue, stage right* The Umbrella Company!
Working via an umbrella company has its advantages, here are 5 key ones to consider:
Yep, being outside IR35 means that you can operate as a limited company or sole trader, which has certain advantages when it comes to expenses etc. But, it also comes with all of the hassle of accounting, record keeping, self-assessment, contract of service upkeep etc, etc.
Being inside IR35 and working via an umbrella company reduces admin, responsibility, accountability, HMRC correspondence etc. All tax and NI is deducted automatically for you on a PAYE basis, you still have the freedom of assignment like every other contractor, but you have one employer to look after all of your payroll processing and employment formalities for a small weekly fee. You still work as a specialist in your field, you still get to choose your working hours and assignments, but all of the boring admin is taken care of for you!
Starting out means uncertainty, which is why choosing to work through an umbrella may be the best way to ease in to your new working lifestyle. Umbrellas are also a great way to start when getting into the world of contracting if you aren’t sure whether you would like to pursue contract work long-term. Aside from a payroll processing fee there are no financial demands and there’s no-tie in period. You can simply use an umbrella as and when you need one, making them an ideal solution if you work on shorter contracts or if you may be flipping between inside and outside IR35 assignments. We can’t speak for others, but we’ll only ever charge you a processing fee when you’re actively billing through us, if you decide to take a 3 month break to pursue other avenues then there will be zero charge for staying on our books until you decide it’s time to return.
Once you’ve registered with an umbrella company, you become an employee of theirs and benefit from continuity of employment. This is beneficial if you’re working in multiple contracts alongside each other. You will still be seen as one employee of the Umbrella Company, and your tax code won’t be negatively affected.
Continuity of employment is really useful for contractors and freelancers who are looking to source finance from a bank, such as a mortgage. SwanHealth has partnered up with Roots Mortgages to help and provide advice on how to help contractors. Many lenders will be favourable to workers with continuity of employment because having one employee over a long period of time shows consistency of reliable income.
Once you have registered with an umbrella company, you will be automatically enrolled into a workplace pension. Umbrellas are legally required to enrol contractors into a pension after 12 weeks. There’s nothing to worry about if you have an existing pension scheme in place or are not interested in continuing with the workplace pension scheme with your umbrella company, you can always opt out.
As you know, workplace pensions are a great way to save for retirement and offer many benefits which include:
Salary Sacrifice is a great way to boost your pension pot. It allows you to allocate a percentage of your pre-tax earnings towards your private pension. Plus, contributions to your pension aren’t subject to tax and NIC, making Salary Sacrifice an extremely tax-efficient way to save for the future. Salary Sacrifice is particularly beneficial if:
If you’d like more information about this with SwanHealth please don’t hesitate to get in contact with us and we can advise you on how to increase your contributions into your workplace pension. If you’d like a tailor-made Illustration of your take home pay, please fill out our form here and we will get back to you as soon as possible with your projection.
Every compliant UK based Umbrella Company will provide you with a PAYE payroll service. However, SwanHealth goes the extra mile and offer little extras to provide better value. Below you can see the extras that you can get:
Hopefully the above encourages you to explore the world of umbrella companies to fulfil your contracting ambitions. We’re here to help, and our sole objective is to take care of hard working contractors such as yourself. If you have questions we’d love to hear from you.