If you’re thinking of going down the temp/contractor route, it’s worth considering how you want to get paid.
Two of the most common routes to take is to form your own limited company or use an umbrella company.
For someone who may be considering venturing away from permanent employment for the first time, we understand it can all seem a bit tricky, so before you choose between limited company or umbrella, here are a few things to consider.
When you choose to take on a temporary assignment, you can opt to get paid through an umbrella company. In this instance, you effectively become employed by the umbrella company, and work on site for the end client. Choosing an umbrella company allows you to take on temporary assignments while they take care of all the administration for you.
Each week/month you will need to fill out a timesheet for your hours worked and submit to the umbrella company who will then invoice the end client. The end client will pay the umbrella company who will take care of your tax and National Insurance contributions before paying you your wages and any expenses claimed.
The biggest benefit to using an umbrella company is simplicity. Registering with an umbrella company is a lot quicker than setting up your own limited company, and they take care of all your administration, but for a small fee of course.
Contract Recruiter Elliot Brownlow, also from TEC Partners, suggests: “Umbrella companies are a really useful solution in the first instance when first-time contractors are offered a contract but might not have their limited company in place.”
A limited company is a private company which you can set up and incorporate with companies house. It is a stand-alone entity, which means that in the eyes of a law it can be treated as its own person; completely separate from its employees. As a director of your own limited company, you will invoice your clients through your company which will then pay you a salary.
If you are considering contracting through a limited company, first of all you will need to set up your own limited company and register with companies house. Once your company has been established, you will be able to invoice the clients and get paid through your company. You will also be responsible for keeping track of your own income, expenses, and submitting your tax return.
Whilst using an umbrella company might be the most hassle-free option, contracting through a limited company will certainly offer you more control. As the director of your own limited company, you will have complete control of the company’s transactions, direct contact with end clients, and the perception of being ‘more established’.
Naseem from TEC Partners continues: “A Limited Company is a lot easier to set up than it sounds! Unless you’re on a low rate or a really short contract, I would recommend the limited route as the benefits long-term far outweigh the added administration that an umbrella company handles.”
If you’re currently considering your next temporary contract with an accountancy or finance role, contract us today to learn more about our current opportunities.