With a number of unscrupulous umbrella companies in operation, it’s understandable that workers are nervous about engaging with them. However, Mango Pay remains vocal in our defence of compliant umbrella companies. We think it’s an ideal solution for contractors working on short to medium length assignments.
In this blog post, we aim to dispel some of the common myths and misunderstandings associated with working through an umbrella to prove they are in fact a fantastic option for today’s temporary workforce.
Myth #1: Umbrella companies are tax-dodgers
Reputable umbrella companies who are members of Professional Passport or FCSA are full HMRC compliant and you should have nothing to worry about. However, be on the lookout for umbrella companies that promise up to 90% take-home pay. Some are offering such benefits as a contractor loan scheme. But HMRC has made clear this is tax avoidance so getting involved could well land you in trouble.
Myth #2: I’m not entitled to holiday pay or other state benefits
You certainly are. If you’re a full-time worker, you have the right to a minimum of 28 days paid leave, including bank holidays. More paid leave is possible under the Agency Worker Regulations. Those working on a casual basis or irregular hours are still entitled to holiday pay, calculated as a percentage of the hours worked.
In addition, you’re entitled to statutory sick pay, and when you have worked for the statutory qualifying period, you’re also entitled to a workplace pension, and if appropriate maternity or paternity pay.
Myth #3: Umbrellas let you increase your take-home pay through claiming expenses
Not since April 2016. Before then, contractors working through an umbrella company could benefit from tax and NIC relief on the costs of getting to and from assignment locations. Now anyone working under ‘supervision, direction or control’ in carrying out their duties do not qualify for reimbursement of home to work expenses.* While there are exceptions, be cautious of umbrella companies that offer this.
Myth #4: By working for an umbrella, I’ll be subject to IR35
IR35 rules aim to tackle disguised employment. For instance, if you’re an employee of the umbrella company, you’re outside of the IR35 scope. So be aware of any umbrella companies that are marketing themselves as IR35 compliant as this is irrelevant.
If you have any questions or concerns around working through an umbrella company. we’re here for you. We can help if you’d like to find out more about Mango Pay’s compliant umbrella solutions. You will get a straight answer – call us on 03300 580 190 or drop us an email on firstname.lastname@example.org.
*This now applies to most workers.