From quite a small number of companies over ten years ago the number of companies offering their umbrella services to the growing contractors and freelancers market has also increased. Up to 2007 Umbrella companies could offer to pay their contractors either by company dividends with the contractor being a Director of his or her own company, or by the PAYE system. Since 2007 the only option is to pay by PAYE. Umbrella companies act as an employer to contractors and freelancers and are governed by the rules of HM Revenue and Customs and PAYE rules. Thus one company cannot promise to pay you more than others as the only difference between companies will be the level of their fees – as well as the additional services they will offer (again at a cost to the contractor). Contractors will want to look at the different company fees: reputable companies will charge a flat fee irrespective of the amount the person is actually earning as the amount an individual earns does not really change the level of admin needed. A contractor should be paying an umbrella company between £15-£20 per week but will vary with the level of services for that amount. (For example, is the fee for professional indemnity included in the fee?).
Many busy freelancers and contractors will appreciate the umbrella services as this takes much of the hassle out of their working life and enables them to concentrate on their work.
Not everybody wants to manage their own complicated accounts.