Know Tax Obligations & Employment Rights of being an Umbrella Company Employee

Tax Obligations & Employment Rights

Do you know Pepsi, Coca-Cola and Unilever are all umbrella companies? An umbrella company is a company that is often used by agencies for paying temporary employees or contractors. The pay is paid through Pay As You Earn (PAYE) method. Interestingly although the work done by the temporary employees is not for the umbrella company, it is technically their employer. Today, more and more people are willing to explore self-employment opportunities. They are becoming employees of various umbrella companies to get paid for their temporary projects., especially in a post-pandemic world. These companies usually process salaries on a weekly or monthly basis.

So, if you are about to join an umbrella company as an employee and worried about your tax obligations or employment rights, here we go!

Tax obligations

Yes, like any other permanent employee, you also have some tax obligations under some conditions. For example, if your annual income exceeds the yearly personal allowance of £12,570, you will be subjected to tax obligations. Like any other employee, you will also have to contribute to the National Insurance(NI). The best thing is that the umbrella company will make these relevant deductions from your salary even before you get your net take-home salary. So, this is a hassle-free affair!

Employment rights

As an employee of an umbrella company, you would be entitled to get an array of employment rights that are as follows:

  • Access to Statutory Sick Pay(SSP), Holiday pay, and Maternity Pay. The SSP rate is now £99.35/week for sickness absence if you’re too sick to work for the last seven months.
  • An opportunity to work for multiple clients translates into an assurance of employment continuity. This proves very helpful when you are already trying to secure a loan or paying off some mortgages.
  • Automatic enrolment for workplace pension if you are above 21 years or the age of State Pension. You may also choose to opt-out of the pension scheme as your choice., especially if you are enrolled in a private pension scheme.
  • Overtime payment, performance bonuses, and shift allowance are other rights that offer much-needed job satisfaction.
  • Paid time off in case of any antenatal appointments with a physician. If you are a soon-to-become parent, this is indeed bliss!
  • Eligible to claim expenses like business expenses, client billable expenses, non-client billable expenses, and so on.
  • Access to staff canteen, prayer room and other amenities that meant for permanent staff

Remember, if you worked for more than 12 weeks for the Umbrella company for the same contract, you would become entitled to fair treatment under AWR (Agency Worker Regulations). This means that now you will receive the same working conditions enjoyed by those recruited directly by the agency!

Lastly, you have to be alert while working for an umbrella company. Many such companies have tax-avoidance schemes that enable them to make tall promises about higher take-home pay. So, check out their testimonials, reputation and employee benefits. In case of any confusion, it is better to get in touch with our experienced accountants at CoreAdviz.