Umbrella companies are being used by contractors more than ever due to the major benefits they provide.
There are many financial advantages of using an umbrella company and often some additional benefits are available.
Working for an umbrella company as a contractor is a good solution for many situations, including those who are looking for long term jobs, professionals wanting to gain varied experiences or knowledge, and those who are not quite ready to become their own bosses or own their own companies.
Below is a list of the top 10 benefits of using an umbrella company:
Today’s job markets are competitive and in some specialities, the number of positions available is limited. Those who have been laid off or find themselves out of a job, for any reason, may not find a new position right away.
Rather than waiting for the right position or invitation for an interview to come along, working as a contractor under an umbrella company is a suitable alternative.
The individual who is between jobs can work for the umbrella company as a contractor, without the hassles or downfalls of permanent employment. Then, when or if the right job offer comes along, he or she is under no obligation to continue the relationship and will be free to take the offer.
Working as a contractor also gives a job seeker a way to fill in gaps, which are often red flags on job resumes or in job interviews.
Many companies reimburse their employees on a regular basis, for expenses such as travel, meals while traveling, tolls, equipment rental, and other costs. However, as a contractor working under and umbrella corporation, such expenses are typically not reimbursed.
The good news is that most contractors in such cases can deduct legitimate expenses from their income on their tax returns, thus reducing their taxable income.
Some umbrella companies may offer reimbursement. If a contractor would rather be reimbursed up front, this is a detail that may be worked out at the time the agreement is established.
For many contractors, being able to reduce the taxable income is more desirable.
Seeking out new jobs or contracts for work is time consuming and labor intensive.
Many umbrella companies have the ability to seek their own contractors with other companies. This means the contractor only has to understand the terms and meet the terms of the contract.
The negotiating for payment and the scope of the work is typically done in advance.
Contractors who are just starting out on their own or job seekers between jobs may not have the experience or know how to negotiate terms of a contract. Having these details worked out in advance allows professionals to focus on their work and applying their skills. It can also eliminate the costs associated with seeking legal advice about the terms and conditions of a contract.
Professionals who are in careers where demand for their work can fluctuate may find themselves working continuously, when signing on with an umbrella company.
This reduces the likelihood of gaps in employment and in the resume, making the individual a better prospect, should a full time, permanent job come along in the future.
For others, having steady work is the main goal, as they may have family and financial responsibilities that are more important than making decisions related to becoming a ltd company.
Operating costs include payroll, accounting, and contract negotiation costs, among others.
With an umbrella company, these tasks are already taken care of. The contractor doesn’t need to worry about the time and expense of handling the day to day operations details.
Without having to worry about such expenses, the contractor may experience an increase in income as your time is left for you to actually perform paying work rather than administration.
Some contractors would like to avoid getting stuck in long contractors, which may end up being too costly in the long run.
By working for the umbrella company, the individual can simply decide when he or she is done working on a specific project, in many instances. This is a detail that should be worked out with the company in advance.
By having this stipulation in writing, the individual can leave if the nature of the work does not align with his or her capabilities or if some legal or ethical situation arises that the individual is not comfortable with.
Being able to walk away from a questionable situation is often the best way to avoid legal battles or ruining one’s professional reputation and to maintain one’s own level of comfort within a profession.
Many contractors want to work for themselves or establish their own schedules to meet other obligations, such as caring for aging parents, caring for children, or taking on home projects.
Others simply want to work the hours of their choosing, as they know best which schedules and hours are best suited to optimal performance.
Regardless of the reason, working for an umbrella corporation can give professionals the freedom they want to determine the hours and amount of work they feel comfortable committing to.
Tasks like payroll, audits, accounting, and scheduling require an extra pair of hands or additional time. Either can be costly to a contractor. Working for under an umbrella eliminates these costs for the individual, as the company will usually handle all these tasks.
The contractor can then focus on what he or she does best and may be able to take on additional hours or work responsibilities.
Going to work for an employment company is fast and easy. The individual simply fills out the necessary paperwork, specifies skills, abilities, hours willing to work, and compensation expected.
Often, the relationship is established with a single interview, though individual may be able to apply online.
There are no additional fees, negotiations, or details to be concerned with, for the contractor.
The umbrella company staff will conduct a background check on their own and will check references in a timely manner. In some cases, the individual may begin working within a day or two, depending on the level of demand for his or her expertise.
Often, companies will lay off entire units or groups of employees at different capacities and pay levels.
By signing up with an umbrella company, two or more employees with good working relationships can seek out new projects to work together on. This may be particularly important in the trades, where tradesmen and journeymen often work together.
There are no hard and fast rules about seeking work through an umbrella company. However, for most individuals, the ability to set a preferred schedule, develop new skills, refine current skills, and seek out the most desirable working conditions are some of the main benefits.
The financial benefits include reduced administrative costs and in some cases, reduced tax liability for legitimate work expenses. Such agreements or work situations are not for everyone, but they can be viable solutions for those who are between jobs or who aren’t ready to strike out on their own to form a new company.