| It has been the tradition for contractors to refuse | | | | style solutions claim to save contractors money. |
| efforts to make them into regular PAYE employees. | | | | Legitimate umbrella companies such as Parasol, Equity |
| Contractors enjoy additional earnings and a more | | | | Incentives, Streets LLP, etc., which do provide an |
| flexible working schedule (should they choose of | | | | "actual" employment model for their contractors, follow |
| course) However, they haven't had the same benefits | | | | all employment benefits specified by statute. They are |
| given to full time, permanent employees. That is where | | | | usually members of recognized trade bodies and |
| an Employee Benefit Trust (EBT) steps in. Umbrella | | | | regularly pass vigorous membership compliance |
| companies offer statutory benefits to contractors, | | | | requirements. Those companies under trade body |
| which include: | | | | membership, provide contractors ongoing holiday pay. |
| - Holiday pay | | | | Legitimate umbrella companies act as a "regular" |
| - Maternity and paternity leave benefits | | | | employer. Now when a contractor needs a mortgage |
| - Statutory sick pay commensurate with regular | | | | reference, he has a company that can give one, and |
| employees | | | | an HR department to process the request. Support for |
| - Guaranteed minimum wage or above and minimum | | | | grievances and disciplinary procedures are also |
| weekly hours | | | | provided if questions come up between the contractor |
| - Redundancy payments | | | | and the client. |
| - Contractors may have no employee rights with their | | | | Quality employee benefit trust companies have |
| clients, but an umbrella company (EBT) that genuinely | | | | stringent requirements for their contractors. This |
| employs its contractors provides the full range of | | | | ensures that the contractor hasn't gone beyond |
| employee's rights. | | | | expense limits with past clients or left tax bills unpaid. |
| All umbrella companies are not the same. The Pay As | | | | After working with an umbrella company for a period |
| You Earn (PAYE) model sees the worker as an | | | | of time, that company will increase minimum payments |
| employee for income tax purposes. The agency | | | | to the contractor at times when they aren't in statutory |
| deducts National Insurance Contributions and income | | | | redundancy pay or in a contract. |
| taxes before payment to the contractor, even though | | | | Reputable umbrella companies make benefits available, |
| the contractor isn't an actual employee. Other | | | | provide stability, and support for the contractor that |
| companies claiming to be umbrella companies provide | | | | regular contracting doesn't. This arrangement still offers |
| the contractors an employee benefit trust paid into an | | | | higher earnings and a more flexible schedule than a |
| offshore account. Neither offshore accounts nor | | | | permanent, full-time job. The contractors needn't worry |
| agency PAYE models may give contractors | | | | about office politics, or fighting for the next promotion. |
| employment rights. Many companies offering EBT | | | | |