As the name ‘Umbrella Company’ implies, contractors receive a level of protection when working in this way. The independent contractor is legally considered to be an employee of the umbrella company itself.
If you use an umbrella company, you will be required to send your timesheets to your umbrella company who will then invoice your client or agency directly. An umbrella company will run payroll, send you your take home pay and deal with any applicable paperwork for you.
All umbrella companies are governed by HMRC, which means that your take home pay should be the same whichever umbrella companies you choose, allowing for differences within their fees. It is essential that you always deal with a reputable umbrella company as they are responsible for the payment of your tax and National Insurance contributions.
An umbrella company is most commonly used by contractors working under a short-term contract.
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