Top Alternatives To Umbrella Companies In 2019

May 23, 2019

Categorised in: IR35, Umbrella Company Alternatives,

Here we look at the top alternatives to using an umbrella company.

What Is An Umbrella Company?

An umbrella company acts as the employer of the contractor/temporary worker which in turn allows the umbrella company to calculate all tax, National Insurance and business expenses per contract. As a contractor, upon securing a new contract, you will send it on to your umbrella company and not sign the contract yourself. In return, you will receive a contract between you and your umbrella company, not your client.

Advantages

As a contractor, using an umbrella company can be seen as hassle free as the umbrella company will take care of all of your administration tasks, including chasing payments and processing payroll. Working through an umbrella company can benefit those who are looking to explore contract working due to the low risk involved. If you decide to pursue a career in contracting then you can easily set up a limited company at any point.

Disadvantages

Umbrella companies will advertise that they are a low maintenance method of contracting and although this may be true, they also come with disadvantages and may not suit everyone. As a contractor, using an umbrella company is not the best way to maximise your income, they will deduct a service charge from your final payment, thus resulting in a lower take home pay. Service charges will vary depending on which umbrella company you use, therefore it is crucial that you find this information out upfront before signing any binding contracts.

Limited Company

A popular alternative to using an umbrella company is to set up your own limited company. Many contractors believe this method comes with a lot of hassle however, there are many advantages to setting up your own limited company. Contractors using a limited company will avoid service charges associated with alternative methods, thus increasing their take home pay. As a director of a limited company you will be able to claim on a wider range of legitimate expenses such as travel, equipment, phone and accountancy fees, therefore paying less tax.

Sole Trader

As a sole trader, you will own your business as an individual and be categorised as self-employed. Many self-employed workers will start up as a sole trader due to its ease, the small amount of administration, and lower set up costs. A major difference between a sole trader and a limited company is that as a sole trader, there is little distinction between your personal assets and business assets, therefore your personal assets are not protected. If the business was to get into debt then a sole trader could lose their home, personal savings and also any other assets belonging to them outside the business.

Agency PAYE

Working with a recruitment agency can seem similar to working with an umbrella company. Both options result in the contractor becoming the employee, allowing the agency to calculate the taxes, National Insurance and also business expenses. As with an umbrella company, agencies will take care of all administrative tasks, thus allowing you to concentrate on your work. As a contractor/temporary worker, you will want to maximise your take home pay. Umbrella companies often offer contractors the opportunity to claim expenses as a way of tax avoidance, however agency PAYE will not offer this due to the risks associated.

Hive360 – A Popular Umbrella Company Alternative

Hive360 uses a simple employment model that has seen millions of US businesses thrive and succeed in an increasingly competitive market and modified this for the UK. At Hive360, to ensure we deliver exceptional customer service, we place our customers at the centre of the business. We provide GDPR compliant, securely encrypted digital payslips as well as a telephone hot line support for any employee queries.

Don’t run the risk of losing your best talent, get in touch with us today.