A guide for contractors who work via an umbrella company recently received an update to help such workers understand their pay and tax positions.
In his Good Work report, Matthew Taylor made recommendations for more transparency, and as a result, the Low Incomes Tax Reform Group and the umbrella representative group PRISM produced a fact sheet for workers who are engaged through an umbrella company.
The fact sheet, entitled Working Through An Umbrella Company, offers guidance to contractors who use these companies’ services. It provides information on employment status and tax as well as practical tips on how to avoid problems with deductions and pay. The fact sheet is primarily for those workers who receive a low wage, as they face specific risks by working via an umbrella company, but it is also helpful for anyone engaged through such an organisation.
Working Through An Umbrella Company covers a range of issues that workers commonly ask questions about, such as holiday pay and other employment rights. For example, they may wonder if travel expense relief is available or why an agency may have recommended them to an umbrella company to start with. The guide includes a diagram to explain the workings of an umbrella company and a sample payslip to help workers understand their payslip entries.
The fact sheet also features a “ready reckoner” that enables contractors to understand the rewards that an umbrella company may offer them and figure out whether these rewards are equivalent to what they might have received if they worked in another manner. The updated guide reflects the changes in the National Minimum Wage.