Why Using An Umbrella Company Is a No-Brainer For Your Contracting Lifestyle

So, you’ve made the decision to venture into contracting, and now it’s time to organise your set-up. If you’ve done your research, you’ll know that the way you can operate (and be paid) is not necessarily up to you; rather, it is determined by a thing called IR35, which requires careful consideration on the part of the party engaging your services.

As is the case with contractors – you will probably be applying for many different temporary assignments that fit your skill set. If certain requirements of the assignment criteria are met, you may be determined to be “within IR35,” which means you cannot use your personal service company and must operate in an employed position. The problem is that the end-client doesn’t want to permanently hire you for a position that is only temporary, and your recruitment agency might not have payroll functionality, or you may choose to opt for something to give you more longevity if it is just a short-term role. What’s left when you can’t work as self-employed?

Cue The Umbrella Company’s Intro Music!

There are benefits to working through an umbrella company; here are the top 5 to think about:

1. It's less difficult than being outside of IR35!

Yes, operating as a limited company or sole trader gives advantages in terms of expenses and other factors. However, there is the added trouble of accounting, record keeping, self-assessment returns, contract maintenance, etc. also come with the package… it’s relatively labour intensive (outside of actual work time!)

Working through an umbrella business and falling within the IR35 minimises administrative work, accountability, liability, HMRC contact etc. You still have the same freedom of assignment as every other contractor, but for a small weekly charge, you have the benefits of having a single employer who handles all of your payroll processing and employment procedures. You continue to be an expert in your industry and have control over your working hours and assignments. Freedom simplified.

2. The Flexibility

Working under an umbrella may be the best method to ease into your new working lifestyle because starting off is uncertain to say the least. If you are unsure whether you want to pursue contract work in the long-term, umbrellas are a fantastic place to test the waters. There are no financial requirements or obligations other than the payroll processing cost. While working on shorter contracts or switching between inside and outside IR35 jobs, umbrellas are a great option because you have no long term obligations. While we can’t speak for everyone, we’ll never charge you a processing fee unless you are actively billing with us. If you take a couple of months’ break to explore alternative options, there will be no fee to remain on our books or even to leave our employment for a time if you take some time out or land an outside IR35 role.

3. Continuity of Employment

When you sign up with an umbrella company, you officially join their staff base and gain the advantages available to every UK employee. If you are simultaneously employed under several contracts, this is advantageous. Your tax code won’t be impacted and you’ll still be treated as employee of the one umbrella company.

For contractors and independent workers trying to obtain financing, such as a mortgage or loan, continuity of employment is quite helpful. Having one employer for a long time demonstrates constancy of regular income, many lenders will favour people with longevity of employment. If you are wondering who to go to for contractor mortgages, give us a call and we’d be happy to put you in touch with someone who understands your situation.

4. Pension and Salary Sacrifice

Umbrella companies are obligated by law to enrol contractors into a pension. There is no need to be concerned if you already have a pension plan in place or decide you do not want to continue with the pension plan offered by your umbrella company. You can always opt out.

As you are aware, workplace pensions are an excellent way to save for retirement and provide a number of advantages, such as:

  • The capacity to supplement your state pension with additional income in retirement.
  • Unintentional, automatic saving! Due to the little monthly contribution, many people are unaware they are making pension payments – but it all adds up!

In most cases, you do have the ability to increase your pension pot through salary sacrifice. You are able to designate a portion of your pre-tax income towards your private pension. Salary Sacrifice is a very tax-efficient strategy to save for the future because pension contributions are neither taxed or subject to NIC. Salary Sacrifice is especially advantageous if:

  • You make a good living.
  • You want your pension fund to grow quickly.
  • You earn money from additional sources.
  • You’re relieved to see your monthly pay retention (and tax liability) go down because you’ll be contributing more to your pension.

Please don’t hesitate to contact SwanHealth if you’d like more details about this. We can offer you advice on how to raise your workplace pension contributions. Please fill out this form if you’d like a custom illustration of your take-home earnings. We’ll get back to you as soon as we can with your forecast.

5. Little things that add up to a big difference

You will receive a PAYE payroll service from any UK-based umbrella company that is compliant with the law. SwanHealth, while being compliant, goes above and beyond and gives extras to offer better value. The bonus features you can expect are listed below:

  • Same Day Payments – The same day we receive your payment from your client or agency, we will process it and deposit it into your account. Some umbrella companies utilise BACS, which can take three to five days to process, or only process payment on a Friday.
  • Access to your personal system 24/7- You will have access to our secure online portal, which makes it easier than ever to submit timesheets and view your payslips. We will also send you a text message when you funds are received in your account.
  • Employee Benefits – You are eligible for Statutory Benefits, such as Sick Pay, Maternity Pay, and Holiday Pay.
  • Insurance Protection – Public Liability, Professional Indemnity and Employers Liability Insurance protects each and every one of our clients. We ensure that we have £10m cover for each of these.
  • Referrals Rewards – For each successful referral of friends or co-workers to our services, we will offer you bonus to say thanks.
  • SwanHealth Loyalty – When registering, you gain full access to our premium rewards programme. You will receive access to Perkbox Gold, one of the best employee rewards programmes in the nation, as well as to freebies from restaurants, coffee shops, streaming services, and other businesses each month. You will also have access to special offers from renowned businesses and attractions. Further information about our rewards platform is available here.

We’re here to help, and our one and only goal is to look after diligent contractors like you. We would love to hear from you if you have any questions and to help you start your umbrella journey.