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Advantages of Umbrella Company Employment: What Recruiters Need to Know 

Where your contractors have a choice between umbrella company employment and agency PAYE, it’s usually better for them to go umbrella, unless they only intend to work on one short Assignment. This can be a challenging thing to explain, though, so in this article we’ll look at the advantages of umbrella company employment, for you and for your contractors.

When your contractors sign up with an umbrella company, they become a permanent employee and this is the main reason for choosing umbrella. This gives them all the rights, benefits and protections afforded to employees by UK law, and these continue in between assignments until their employment ends. In our experience, most umbrella contractors complete more than one assignment.

With agency PAYE the contractor is only engaged for the duration of each assignment. This gives them a succession of shorter engagements, which can limit their access to certain employment rights, and they may or may not be classed as an employee.

For your contractors, the benefits of umbrella company employment include:

Sick pay

As your contractor’s employer, the umbrella company must pay statutory sick pay if your contractors are unable to work because they’re ill. There are three “waiting days” so they’ll only be paid SSP if they’re off sick for four days or more.

Paid holiday

As a permanent employee, your contractors will be entitled to accrue holiday pay. Their entitlement will depend on how much they work, but assuming full-time work for a full year, they’ll accrue at least 5.6 weeks (28 days) paid holiday.

Access to a workplace pension

All UK employers must provide and contribute to a workplace pension for their employees. At the time of writing the minimum total contribution is 8% of qualifying earnings, with at least 3% being contributed by the employer. Some umbrella companies may allow contractors to choose their own pension and contribute via salary sacrifice, which further reduces the cost of saving for retirement.  

Maternity/Paternity pay

Assuming your contractors meet the qualifying conditions, their employer is required to pay Statutory Maternity or Paternity pay. At the time of writing SMP is 90% of average weekly earnings (before tax) for the first six weeks, and the lower of £148.68 or 90% of average earnings for the next 33 weeks. The umbrella company will be able to determine whether the contractor qualifies.

Continuous employment

As long as they stay with the same umbrella company, your contractor will have one continuous period of employment across all their assignments. This makes references and credit/mortgage applications easier, as they only have one employer for the whole period. It also means that these employment rights extend to periods when they’re not working - for example when between assignments or taking a holiday

What’s in it for you as a recruiter?

From a recruiter’s point of view, outsourcing employment to a good umbrella company means you can hand the work, cost and risk of employing contractors to a specialist expert, freeing you up to focus on your core business.

You may also find that recruitment and retention become easier, when your contractors have more security, and therefore less pressure to move on from contracting. 

If you have questions or if we can help in any way, please call our expert team on 01296 468483 or email

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