Offshore Umbrella Companies and their employment rights

Contractor working through a Limited Company is the director of that company. However, whether inside or outside IR35 Legislation such contractor is not eligible for any sort of employment rights. While the contractors working as employees of offshore Umbrella Company are offered basic employment rights.

Which Umbrella model you can choose

Not all the Umbrella models are the same as there are various shades of grey associated with such companies. The agency PAYE Payroll model acts as the employer of contractors and deducts Tax and NI contributions from their pay. However, the contractors are not employees of such agency.

Some other companies portray themselves as Umbrella Companies offer contractors an offshore payment solution like employee’s benefit trust. Contractors are not provided employment rights whether they work with agency PAYE or offshore schemes. Such providers may advertise to help contractors save considerable amount of tax by claiming their expenses. This may not be beneficial for contractors but can attract the attention of HMRC.

Benefits of Umbrella employee

The employment benefits offered by Umbrella companies may not be the same as permanent employment yet this factor is compensated by offering additional earnings and flexible working hours.

The basic employment rights, a contractor can get while working through Umbrella Companies are explained as under.

  • They can claim their statutory sick and holiday pay.
  • Contractors can receive maternity and paternity benefits.
  • Their minimum working hours and wages are guaranteed.
  • They are also offered redundancy payments.

The procedure adopted by different Umbrella providers to perform their obligations may vary, but contractors should look for those companies, which offer maximum benefits.

Why a regular employer infrastructure is required?

The Umbrella Companies must have a regular employer infrastructure like seasoned finance, payroll and HR departments to provide state of the art facilities to their contractor employees.

Contractors are helped to obtain different financial benefits being an employee of Umbrella Company. They can apply for a mortgage and use the reference processed by HR department of such a company. The administrative duties of contractor like Payment processing, Tax deduction and maintenance of accounts can only be fulfilled if managed by a regular employer infrastructure.

Moreover, a regular employer infrastructure is also beneficial in other ways. A functional HR department can address the grievances of contractors in a professional manner and can keenly observe their performance to satisfy the client.

How things work?

A top rated Umbrella Company provides hassle free procedures for contractors who want to join it. In the mean time, contractors are also advised to show due diligence by remaining within expenses limits and make sure all their previous taxes are paid off. Contractors can join Umbrella Companies of their choice by entering into a contract with them. All their future contracts would fall under the Umbrella of this contract of employment. Therefore, they can save time and energy as there is no need to complete paper work regarding each individual contract.

As the length of employment with Umbrella Company increases, a contractor becomes eligible to get increased minimum payment when there is no contract or redundancy pay. However, they have to fulfill some sort of responsibilities as an employee, in order to compensate for such benefits.

Umbrella Companies offer such other benefits, which are not offered to the contractors linked with limited companies. The earnings of Umbrella Contractors are considerably higher than any equivalent permanent job. Moreover, the procedure adopted by Umbrella providers is quite simple and flexible.

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