A PAYE umbrella is defined as a type of company wherein self-employed contractors so they do not have to create their limited company. The umbrella acts as the middle person between the contractor and the recruitment agency or the end client.
The PAYE umbrella will take care of any administrative tasks such as dealing with taxes or accounting. The umbrella will also take care of payroll; they would process the invoice and the contractor will get paid for the completed work.
Do You Need The Help Of An Umbrella?
Organizing and managing a limited company has its challenges and is not always the best choice, especially for contractors. This holds true especially for new contractors wherein they may not have the resources or even time to set up a limited company.
If you do not want to be bothered with all the tasks of setting up a limited company; then the best solution is to get help from an umbrella. In that way, contractors do not have to take care of administrative tasks or keep any company records, taking care of company responsibilities such as filing VAT returns.
What Are The Top Advantages Of Hiring An Umbrella?
- Fewer admin tasks
The main role of an umbrella is to take care of admin tasks such as chasing payments, invoicing, payroll and sending timesheets. In this regard, the contractor can instead focus on their primary tasks since the back-office tasks are already handled by the umbrella.
- Best for short-term contractors
Contractors do not have to deal with the hassles of setting up a limited company when they can just hire an Umbrella company to take care of the deed. An umbrella helps contractors save time and energy especially when they only have a short-time project so they won’t have to start a limited company only to end it when the project is done.
- Contractors will have benefits and rights
Contractors are basically employees of the umbrella which means that they can get holiday pay, maternity or paternity pay, statutory sick pay or benefits and workplace pension.
How Does An Umbrella Work?
- When a contractor secures a project, the umbrella will sign a contract with the end client and the contractor will also have to sign one with the umbrella.
- The contractor will agree to the time frame set for the project and will document it in the timesheet which should then be submitted to the manager for approval and signature.
- The contractor will then submit the timesheets to the umbrella or recruitment agency if applicable and they will then send the invoice to the end client.
- The umbrella will process the payroll once they get payment from the end client. The salary that is paid to the contractor comes with deductions such as income tax, pension contributions, umbrella fees and National Insurance contributions. Contractors can also file for allowable expenses and the umbrella will process such claims.
- The umbrella will then provide the contractor with a payslip which will show your take-home pay and the deductions.