The number of contracted workers using umbrella schemes is increasing. Based on figures from the Department for Business Innovation & Skills, around 14% of professional contractors in the UK work through umbrellas companies.
There are different reasons for this increase. The nature of employment is changing for a lot of people, which means they are no longer employed full-time by a single employer.
At the same time, not all self-employed contractors favour setting themselves up as limited companies.
An Alternative Way to Conduct Business
“The appeal for contractors is that umbrella companies offer a real alternative to how they conduct their business. They ensure that if you’re self-employed you’re not out on a limb, but you don’t need to go as far as registering as a limited company.”
“An effective, diligent umbrella company will offer contractors a means of working with less hassle, and less of a personal administrative burden to carry”
“They help ensure contractors are compliant with regulations regarding tax and national insurance contributions. In the construction sector, they support subcontractors working under CIS rules.”
However, it is not just individual contractors who stand to benefit from using umbrella companies.
How Could Recruiters Benefit?
“The vital thing for recruiters when it comes to contractors is clarity. Agencies, in particular, may be managing a diverse range of contractors from various sectors and industries.”
For recruiters, having the clearest possible picture of a contractor’s employment status is going to be a distinct advantage if they are looking to attract hiring clients.
“Recruitment agencies working on behalf of organisations, or the organisations themselves, want to avoid any complications involving HMRC and want to be able to use contractors with confidence”
As the contractor workforce has grown, so HMRC has made moves to ensure greater regulation and compliance. While, historically, contractors may have made use of different tax vehicles, the realistic options for them are now to:
- Register as a limited company
- Use an umbrella company
“It’s about recruiters and recruitment agencies choosing the safest option for themselves and their clients, while still retaining flexibility in the pool of contractors they can select from.”
The umbrella companies offers recruiters a broader spectrum of contractors to choose from while helping to guarantee that the choices they do make will not have any unexpected repercussions around tax and compliance.
“There’s a strong reputational aspect to this for recruitment agencies. They need to reassure their clients that they can do the best for them, and this means ensuring that they find the right contractors for the role, with no unwanted liabilities attached.”
“With umbrella companies integrating PAYE, National Insurance Contributions, CIS and IR35 regulations into their core services, they can offer complete reassurance to recruiters and contractors alike”
One Click Group has published an online Complete Guide to IR35 Legislation, designed to help hirers and contractors gain a clear picture of the these regulations, and how they might affect them. Click here to discover more.