Benefits of using an umbrella company
Working as a contractor through an umbrella company has many benefits. For example, you get to enjoy the freedom of contracting along with employee benefits such as paid leave and expenses. We hope this guide will help you take full advantage of the benefits of being an umbrella company employee.
Statutory Sick pay and leave
If you are too ill to work, then your umbrella company will provide you with Statutory Sick Pay (SSP) which amounts to £92.05 a week for a maximum of 28 weeks. SSP can be paid weekly or monthly and is tax and national insurance deductible.
Some umbrella companies run their own sick pay schemes. Your company’s method of providing sick pay should be outlined in your employment contract or staff handbook.
To qualify for SSP you must:
- be an employee or contractor with an umbrella company
- be ill for 4 days in a row
- earn at least £116 per week (before tax) on average
- alert your umbrella company before their deadline or within 7 days of you falling ill (if there is no deadline
Further qualifying criteria apply. For more information: https://www.gov.uk/statutory-sick-pay
Statutory maternity pay and leave
Employees who want time off to have a baby are entitled to Statutory Maternity Leave (SML) and Statutory Maternity Pay (SMP). SMP can be paid weekly or monthly and is tax and national insurance deductible. The maternity leave is made up of 52 weeks and the pay lasts for up to 39 weeks. Out of the 52 weeks’ leave you are entitled to, the 2 weeks after birth are compulsory.
To qualify for SML and SMP you must:
- alert your company at least 15 weeks before your due date so you can discuss the start and end dates for your leave with them
- give your company at least 4 weeks’ notice with proof that you’re pregnant, such as a letter from your doctor or midwife
Further qualifying criteria apply. For more information: https://www.gov.uk/maternity-pay-leave
Statutory paternity pay and leave
If your partner is about to have a baby, then you are entitled to Statutory Paternity Leave and Pay. You have the choice of taking a 1 or 2 week leave with pay, which can be paid weekly or monthly but is tax and national insurance deductible. To qualify for the paid leave, you must work for your company for a minimum of 26 continuous weeks, alert your company at least 15 weeks before your partner’s due date so you can discuss the start and end dates for your leave with them.
Further qualifying criteria apply. For more information: https://www.gov.uk/paternity-pay-leave
As all umbrella companies pay their contractors through the PAYE system, contractors gain access to the same holiday entitlement as traditional employees. This means contractors are entitled to 5.6 weeks of paid annual leave.
Every payday, 12.07% of a contractor’s taxable income will be deducted. This can be set aside as holiday pay to be paid on request or can be ‘rolled up’ and paid along with your weekly or monthly take home pay.
Provided you have VAT receipts as proof of expenditure then, as an umbrella employee, you can claim back any work-related travel expenses you may have incurred. Expenses cover fuel, car maintenance, parking, overnight accommodation etc.
VAT receipts are essential for proof of purchase as not presenting them when asked by HMRC is considered tax avoidance.
As an umbrella employee, you are covered by the Umbrella Companies insurance which should be:
- Professional indemnity – £5 Million
- Public liability insurance – £5 Million
- Employee’s liability insurance – £10 Million
Umbrella companies should offer its workers a workplace pension scheme as part of the auto enrolment procedures. To this end, the government has set up an independent corporation to run a government backed workplace pension scheme called NEST.