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The benefits of umbrella companies

November 14, 2012 by Jay in Business with 0 Comments

The benefits of umbrella companies
When one company provides day-to-day administrative services for a smaller company, it is known as an umbrella company.  In the United Kingdom, these services are often contracted through recruitment agencies that essentially employ an individual or business to complete a job for a client; afterwards, the association can be either dissolved or temporarily renewed.  Most commonly, this service is useful for smaller business owners, contractors or any other self-employed individuals.

Services provided by umbrella companies
The main job of an umbrella company is to provide administrative and pay-related services.  This is beneficial for smaller companies with limited manpower at their disposal, as their employees will then be able to concentrate on doing the work they are actually paid to do, rather than worrying about paperwork or getting bogged down with chasing invoices.

The umbrella company will also assume several responsibilities, including making sure all relevant tax and national insurance contributions are paid on any wages received and insuring all paperwork is in order and up-to-date.  As everything is electronic these days, there is also the advantage of 24-hour access to paperwork, including time sheets, invoices, tax papers and any other documents that might be required.

No matter which umbrella company is employed, they will all determine the Pay As You Earn tax and national insurance contributions using the same calculations to ascertain how much the client should pay.  Umbrella companies will only differ in the amount of services they offer and the rates they charge.

The advantages of using umbrella companies
By using an umbrella company, a business owner can expect to gain several advantages.  One of the main problems for contractors and self-employed individuals is getting the client to pay up once the work is done.  Many companies have gone bankrupt after a large job that, for one reason or another, went unpaid.  When using a reputable umbrella company, this is not an issue; all funds for work completed to the relevant specifications are guaranteed to be paid on time and in full.

In some cases, umbrella companies offer the option of making use of small company tax relief.
Recent changes to the law have made this much more likely, which is one of the main reasons why
using an umbrella company is on the rise both in the UK and other parts of Europe.

For short-term contractors, working with an umbrella company can make life more convenient as well; the long and expensive process of starting a company, then dissolving it after completing the job will no longer be required.  Instead, contractors can direct most of their focus toward completing individual jobs and then afterward, they can decide whether to continue their partnership.  If the work dries up, the contractor and umbrella company can easily go their separate ways without having to deal with any hassle or legal issues.

When utilising the services of an umbrella company, small business owners, contractors and self-employed individuals are less burdened with the responsibilities of being the “boss”, allowing them to focus more of their attention on actually completing the important tasks they are paid to do.

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