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What are my employment rights as an umbrella contractor?

Working for an umbrella agency is a great way of protecting yourself as a contractor as well as bagging several useful benefits.

However, working for an umbrella company can be confusing if you’re new to it and not sure how it might affect you.

In this article, we look at your rights as an umbrella contractor, to help you make the right decisions when picking an umbrella company and ensure that you receive what you’re entitled to.

What is an umbrella company?

An umbrella company is an employment intermediary that acts as an employer. It provides a link between end hirers or employment agencies and contractors. Contractors work for an end hirer but are employed by the umbrella company directly. The umbrella company takes care of things like payroll and tax and national insurance contributions on behalf of the contractor.

What are the benefits of working for an umbrella company?

Due to the short-term nature of their work, contractors have historically struggled to access credit and other benefits which would usually only be available to permanent employees.

One of the main benefits of working for an umbrella company is that you get continuity of employer. This can make it easier for you to access credit, for example for the purposes of a mortgage, as well as giving you certain rights as an employee.

What are my rights as an umbrella employee?

Working for an umbrella company gives you the same employment rights as working for any other employer. You are still entitled to certain pay and benefits. 

Minimum wage

As an employee you are entitled to be paid the national minimum wage (or the national living wage if you are over 25 years old). You should also ensure that the rate you are getting is comparable to the rate you would get if you were an employee of the end hirer. 

A written employment contract

You are entitled to a written employment contract which details your work as a permanent employee. You are not classed as self-employed and therefore will be registered for PAYE, which means that your umbrella company will need to pay your tax and NI contributions on your behalf, as well as VAT, if applicable.

You should also receive a company handbook, or something similar, which outlines what to expect from your new employer.

Holiday pay

As an employee you are entitled to paid annual leave, as well as paid time off for things like ante-natal appointments. Always ask your umbrella company what to expect when it comes to holiday pay, as there are several different approaches to this. Holiday pay is often “rolled up” into weekly pay. As the contractor it will be your responsibility to budget for future holidays and set aside money from your salary to cover time off if your umbrella works in this way. Or it might be paid as and when you take a holiday. Make sure you fully understand how your umbrella company deals with holiday pay so you can be prepared. 

Pensions

You might have your own private pension, but as an employee you must also be auto enrolled into a workplace pension. Please remember that you have control on your pension, you can choose to opt out of the pension if you feel this isn’t suited to you.

AWR Rights

You should be able to access any collective company facilities or amenities (this might include a canteen or prayer room or maybe a company shuttle bus or other transport services) from the outset. 

However, once you have worked in the same contract for 12 continuous weeks, you are considered an agency worker under the Agency Workers Regulations 2010 (AWR). This gives you the same rights as a permanent employee of the end hirer, including:

  • Limits on the durations of working time, including night work
  • Rest periods and rest breaks
  • The same annual leave entitlement as permanent employees
  • The same basic pay (including overtime rates and shift allowances) as permanent employees
Working for an umbrella company can provide you with protection and peace of mind

Working with a compliant umbrella company gives you the peace of mind of having a permanent employer, without being tied down to one contract. 

If you’d like to find out more about how JMK Group UK can support you as a contractor or provide employment benefits to your contractors as agency staff, don’t hesitate to get in touch.

HOW JMK CAN HELP YOU

Since 2002, JMK have been compliantly consolidating back-office, accountancy and payroll functions. 

We have evolved to provide a range of expert services; such as Funding, becoming a leading provider to the contracting industry.

We know every agency is different in some shape or form, even if only by a little, but important bit. Combining our knowledge and experience of multiple sectors enables JMK to support you all from recruiters and payroll, through to finance, compliance and management.

With JMK as your trusted partner, even the smallest team can process the largest payroll, regardless of payroll type.

Have a look at the wide range of services our Funding can provide to you and your business, it is far more than just payroll and finance.

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