Roofing Contractors and Umbrella Companies

A study by the Institute of Leadership & Management (ILM) revealed that there’s been a rise in disillusioned workers who are looking to leave their current roles and look for work elsewhere.   The research suggests that a massive 37% of employees are wanting to jump ship in this way compared with only 19% a year ago.  A quarter of those surveyed disclosed that they need a change because they feel so underappreciated in their current positions.

Other reasons cited for this lacklustre attitude towards current jobs are wanting a more interesting job and wanting a job with better pay and conditions.   It’s expected that this surge in dissatisfaction could spark off a rise in contracting, particularly in the roofing sector.

Many roofing contractors nowadays work through umbrella companies – companies that act as an employer to agency contractors who work under a fixed term contract assignment, usually through an employment agency.  In contrast to traditional employees, umbrella workers undertake a series of separate assignments, each of which is usually performed at a different location.  For tax purposes, these workplaces are usually classed as “temporary” which means that the cost of travel and subsistence expenses getting to work and whilst offsite can be offset. 

There’s been a rapid rise in the number of umbrella companies since they started back in 2000.  This is probably a result of the increase in internet use in general – many of these umbrella companies can be joined online and employees can submit their hours worked, and expenses via an online portal.   Workers are able to claim expenses pre-tax which will usually reduce an umbrella employee’s gross salary and, subsequently, the amount of tax paid.  There is usually a 5 – 10% difference in take home pay between the Umbrella Company and straight PAYE.

HOW AN UMBRELLA COMPANY WORKS

The best way to explain this is via a series of step by step processes:

1. A would-be umbrella worker joins the umbrella company, either online or via a phone call.
2. The employee signs an employment contract between the employee and the umbrella company (the employer).
3. At the end of each week, the employee submits a work log and expenses to the umbrella company via their website.
4. The umbrella company invoices the employee’s recruiter or client (if working direct).
5. The umbrella company pays the employee through PAYE, after the deduction of allowable business expenses.
6. At the end of the tax year the umbrella company gives the employee a P60 and P11D (for any expenses claimed).

Here in the UK there are already more than 200,000 people working and being paid through umbrella companies and these figures are expected to increase as more and more people choose to work in this way either as a career choice or following a redundancy.