Umbrella Companies

Working a full-time job within a cubicle-filled office may not be the ideal dream career. For many workers, their talents extend farther than a basic hourly job. Workers may need flexible schedules for family responsibilities, such as caring for an elderly parent or young child. Instead of starting a new business on their own, freelance workers are looking toward the world of umbrella companies to form a unique career path.

It can be daunting choosing an umbrella company, that’s why at PayMatters.com we have compiled a complete guide.

What is an umbrella company?

An umbrella company is an established business with many individual clients. To serve those clients, the umbrella company contracts with recruitment agencies. In turn, the agencies contract with freelance workers to perform a task. The umbrella company takes care of tax withholding, and other basic administrative tasks, along with taking a fee off of each project. The freelance worker simply needs to complete the required project for a set price or within a specified amount of time, such as 24 hours or one week.

For many freelance workers, they never contact the individual clients directly. They simply communicate with the umbrella company. The clients may be aware of the contractual work, but only deal with the umbrella company exclusively. With this hierarchy, umbrella companies retain their clients, without losing them to specific contractual workers.

Who are they for?

Umbrella companies are perfect for freelancers that work creatively, especially writing talents. From blogs to full-scale articles, writers can effectively “ghostwrite” for clients through the umbrella company. Other freelancers, such as graphic and web design, can also use these companies for a steady income. Individual clients may be more trusting of a large umbrella company compared to a small freelancer online.

Clients can use umbrella companies when they need to outsource projects. For example, 1,000 product descriptions are needed within a week. The client’s permanent employees cannot possibly finish this task. Using the umbrella company’s vast freelancers, the product descriptions are quickly completed, and posted for increasing profit margins.

How much do they cost?

Umbrella companies can cost as little as £10 per week per client.

What are the advantages of joining one?

Freelancers, using an umbrella company, do not need to worry about administrative tasks. Although a portion of their income is a fee returning to the umbrella company, there is no payroll paperwork, tax calculations or collection calls to clients. The freelancer essentially turns in quality work, and moves on to the next assignment.

Many umbrella companies offer typical employee benefits, including medical insurance and paid holidays. As a freelancer without an umbrella company, these benefits are usually difficult to attain. Shopping around to several umbrella companies allows freelancers to find the right match for their talents and personal needs.

The disadvantages?

Umbrella companies rely mainly on recruitment agencies. If a freelancer is not part of an agency, it is difficult to be chosen. Workers must be accepted by the agency, and then by the umbrella company. The process can be time-consuming, if a freelancer is just starting out.

Although the umbrella company takes care of the taxes, it is still up to the freelancer to calculate if there is enough money being withheld. Workers do not want to be found guilty of tax evasion. Calculating a monthly or yearly tax amount is critical to good payroll practices.

Freelancers are also at the mercy of the umbrella company’s policies, such as client interaction or project charge amounts. If an umbrella company wants a project changed, and the freelancer disagrees, there is typically no recourse to resolve the issue. The freelancer must abide by the rules.

Umbrella companies provide many benefits, and some drawbacks, to their contractual freelancers. Clients approve of the professionalism extended by umbrella companies. By combining freelancers, clients and administration, business projects are completed quickly with finesse.

Which umbrella company do you recommend?

We recommend PayMatters umbrella services, you can read their reviews and get informed.