Unemployment and job cuts are a problem in the UK. Finding work can be a difficult process with many vacancies attracting dozens or even hundreds of applications, competition is fierce. Finding work via a recruitment agency can be a great solution as the agency can do the hard work for the worker, and find work quickly and more easily. However, salaries paid by recruitment agencies can be complicated to work out as they may place people on emergency or temporary tax codes or not include national insurance etc.
Umbrella companies in the UK do all the hard work, making sure that all the PAYE, National Insurance contributions are correct and that it is IR35 compliant. It means that the headache is taken away from working out finances and makes sure that workers are working and earning according to the legal and correct amounts. All of this is calculated before a worker receives their net salary which means they do not need to do anything.
Umbrella companies are also really easy to use. Workers simply upload their timesheets and expenses to a website or email address and they do not have to worry about any further future costs. Using an umbrella company also means that little paperwork needs to be filled out, only the individual time sheet and expenses.
It is also a great solution for people who are unsure about doing temporary work or are contracting as an in between job as minimum input is required. In addition, the cost of using an umbrella service is relatively inexpensive, working out at around £27 a week or £85 a month, though it will vary from company to company. Another benefit of using an umbrella company is that workers can claim basic expenses which will be deducted from your earnings before calculating tax and National Insurance.
Due to the rise in popularity of temporary or ad hoc jobs through recruitment agencies, umbrella companies are needed to help those who find the tax system baffling. By letting an umbrella company take over, it means workers avoid owing large sums of tax or National Insurance in the months that follow and it is easy and simple to use.
Summary: As thousands of people take on temporary or contracted work, there has been a demand for umbrella companies to help with the calculations of individual salaries and tax contributions so that workers receive the correct salary with the right deductions.