Why you must opt for working as a contractor under an umbrella company?
The two sides of the coin:
The world has things that are never ever completely white or black. There is a shade of grey in everything. Even when you toss a coin in the air, there is a probability and a very high one that either of it may turn upwards. You can feel so vulnerable especially when you know that there is an equal chance in the flipping and that you can either win or lose. But not both!
The fun is when you are a flipping a coin and tossing and you know that when it is heads or tails your stake is only limited and since what you are going to lose in the bet is not a great deal our enjoy yourself not bothering too much about the consequences.
The aim of this piece is not to explain in detail about the umbrella companies even though we will succinctly explain its working in order to drive home the point that like all other things there is a good and a flip side to the umbrella companies. The choice of opting to work under a PAYE umbrella company is entirely that of the contractor based on his prerogatives.
What is an umbrella company?
An umbrella company is a company that provides employment to a contractor for a specific period of time or for a particular job. Thus for easier understanding we will liken the relationship between the umbrella company and the contractor as that of Agency where the umbrella company is the principal and the provider of the employment and the contractor shall be an agent of the company representing the company in the clients firm or undertaking.
A valid contract of service:
There is a compulsory need for a valid contract of service between the umbrella company and the need is more because when the terms of the contract are expressed ad clearly and succinctly explained in a legal document it helps both the parties to concentrate more on the work done than to spend time trying to fight out any terms and conditions that they think are just. The contract will therefore also provide for clarity on the relationship between the parties and also provide for leaves like medical and maternity, tax deduction at source and providing for various other tax and social deductions.
What are the advantages for working with an umbrella company?
- Why take risks when you can work with an umbrella company?
Do you have any idea about the hassles of setting up your own business and then turning it around to be profitable? It requires immense amount of dedication and hard work. Working as a contractor in contrast is an easier alternative and risk free way of starting your career.
- Gathering experience:
A lot of people who at the start of their careers prefer to work as contractors with an umbrella company do very well for themselves by gathering as much and as varied experiences as possible. This in turn helps them to determine after some time if they want to set up a business of their own or whether they would like t continue working as a contractor.
- The PAYE benefit:
PAYE is the short form of Pay As You Earn. The financial relationship between the umbrella company and the contractors is based on this concept where the end user or the client pays the contractor’s salary to the umbrella company and the umbrella company deducts the social contributions and the taxation amount also n with a small margin which is the fees for its services and the amount is then credited to the contractor’s account. Thus there is no need to even hassle about paying your taxes within time.
- The flexibility:
The length of the contract can vary. The umbrella company once it takes you on its roll, you can stay there as long as you wish to. being on the payroll of one umbrella company does not stop you from becoming a contractor with another umbrella company.
- Claiming of expenses:
Apart from the normal payment that is rightfully yours after the statutory ad the social deduction, as a contractor he is also entitled to various allowances such as food, accommodation and travelling.
Thus, you see the many benefits of being a contactor with an umbrella company. If you have any queries regarding working as a contractor with one or any queries as to the mode of payment etc, you could check out the following link to be able to have a wider perspective and a deeper understanding.