Umbrella companies: expectations vs reality

Westlakes Fusion unpack the myths and truths about umbrella companies.

By Jessica Leary and Luke Finney 

Are you thinking about working through an umbrella company, but are unsure whether it’s the best option for your circumstances?

We’ve put together a list of misconceptions and facts about umbrella companies, so we can help you decide if working as an umbrella company contractor is the best solution for you.

How do umbrella company fees work?

Many people are worried that working through an umbrella company is costly, as employees have to pay employer National Insurance, pension and holiday costs.

When working through an umbrella company, you actually receive the equivalent rate of pay as a PAYE rate. Your assignment rate through WU is your PAYE rate plus any PAYE costs. 

This means that your umbrella rate is inflated to cover extra costs, however your take home pay will remain the same as if you were to choose an alternative payroll solution.

Will I be under continuous employment?

When working as a contractor, many people believe they will never receive the benefits of continuous employment.

If you choose to work through Westlakes Fusion, you will become an employee of WF, and will therefore be working under continuous employment.

This means you will be able to benefit from the advantages of continuous employment, and will be able to take out loans, receive employee benefits and discounts, and be able to begin a mortgage. 

How will my take home pay compare to working through alternative solutions?

Some contract workers choose alternatives such as working as a limited company, on the assumption that their take home pay will be higher.

However, umbrella companies can save you both time and money.

Umbrella companies charge a flat rate that is only billable when you are in work. So, no hidden fees!

What happens when I’m working on multiple assignments?

It is sometimes thought that you cannot operate as a limited company and an umbrella worker simultaneously.

As an umbrella worker, you can in fact still operate your limited company.

Although your limited company expenses would remain, such as accountancy fees, this can be useful if you are working on multiple assignments.

What about my pension pot?

It can feel restrictive when you’re fixed to a set pension payment and pension provider.

With WF, you can contribute as much as you wish to your pension, provided it does not exceed £40,000 per year and you are still taking home National Minimum Wage.

Umbrella companies offer the flexibility of choosing your pension provider and contribution amount.

Will my experience be personal and suit my unique needs?

Automated telephone responses and describing an issue to a chain of new voices can be frustrating and time consuming, and some people imagine an umbrella company experience to be just that.

At Westlakes Fusion, we offer a personalised experience through our designated account managers and high street presence.

With a number of bespoke products to suit your unique needs, we offer excellence in customer service and customer care.

To find out more about working through an umbrella company, visit https://www.gov.uk/guidance/working-through-an-umbrella-company.