Statutory payments for contractors explained

Complete guide to statutory payments for contractors

What are the benefits of an Umbrella Company?

First, let’s start by looking at the benefits of contracting through an umbrella company.

In exchange for a fee, every umbrella company offers the contractor a range of services and benefits.

This includes employing the contractor and therefore paying them a salary and taking care of their tax and National Insurance obligations. This means that umbrella contractors won’t encounter any tricky and time-consuming tax calculations at the end of the financial year.

An umbrella company also covers contractors under Umbrella Companies Professional Liability and Professional Indemnity Insurance, meaning their compulsory insurance requirements are taken care of. Many umbrella companies will also offer additional types of insurance cover should this be required.

An umbrella company also takes care of the business side of contracting. For example, they will invoice the client on behalf of the contractor and chase any late payments as necessary. The umbrella company will take care of paperwork and admin, as well as other tasks such as processing timesheets and expenses.

Finally, the umbrella company offers the contractor a range of statutory rights.

This is seen as a big advantage of operating through an umbrella company. So, what are umbrella contractors entitled to?

Umbrella Company sick pay

Firstly, every umbrella contractor is entitled to umbrella sick pay, just like any other employee.

Here in the UK, most employees are entitled to statutory sick pay if they become too ill to work. This is paid by the employer for up to 28 weeks.

To qualify for statutory sick pay you must meet the following criteria:

  • You must be classed as an employee
  • You must earn an average of £120 per week before tax and National Insurance. This is worked out over an 8-week period. If you have only just recently started the job you can still qualify for sick leave.
  • As umbrella contractors are employees of their chosen provider they are automatically entitled to statutory sick pay.

    So, should the contractor fall ill and meets the criteria outlined above, they will benefit from statutory sick pay.

    This is unlike limited company contractors who are self-employed and therefore must pay out of their own pockets if they take time off work due to illness.

    Statutory sick pay is currently set at £95.85 per week.

    An employee is eligible for umbrella sick pay if they have been ill for 4 consecutive days, including over the weekend. However, they will only be paid for the days they would have been in work. These are otherwise known as qualifying days.

    You must notify the umbrella company of your illness within 7 days. If you are ill for longer than this time, you will need a note from your doctor or GP.

There are some instances when you will not be eligible for umbrella sick pay, including:

    • If you are already receiving statutory maternity or paternity pay
    • You have already received the maximum of 28 weeks’ worth of sick pay

Umbrella Company holiday pay

As well as umbrella sick pay, umbrella contractors are also entitled to holiday pay.

Under UK law all employers, including umbrella contractors, that work full-time are entitled to a minimum of 5.6 weeks’ paid holiday per year.

If you work part-time, the amount of paid holiday leave you are entitled to will be worked out pro-rata.

The amount of holiday pay you receive is in line with your basic rate of pay. For contractors, this is what they are paid by the umbrella company, not what they charge the client.

Again, this is often seen as a big benefit of contracting through an umbrella company, meaning that should you wish to take some well-earned time off, you will still be paid.

This is in contrast to limited company contractors who will not only miss out on income when going on holiday, they also won’t receive holiday pay.

Umbrella maternity/paternity leave

Another statutory benefit that umbrella contractors qualify for is maternity or paternity leave.

Umbrella contractors going on maternity leave will receive 90% of their average weekly pay for the first 6 weeks, and 90% of their average weekly pay or £151.20 per week (depending on which figure is lowest) for the following 33 weeks.

Umbrella contractors going on paternity leave can take 1-2 weeks’ paid leave which is also set at 90% of your weekly pay or £151.20 depending on which figure is lowest.

This offers contractors a great level of security and stability and is another reason many choose this route over going it alone as a self-employed contractor.

Workplace pension

Finally, umbrella contractors are entitled to a workplace pension.

Any employer must make pension contributions for employees who are:

  • Aged between 22 and State Pension age
  • Earn at least £10,000 per year
  • Work in the UK

Now you know the benefits of an umbrella company, find the best provider with our help

Now you know the range of statutory benefits you can receive under an umbrella company, the next step is to find the best umbrella company for you.

Thankfully, Umbrella Supermarket’s handy contractor calculator can help. Simply enter your details and contractor preferences and we will show you a list of the best-suited umbrella companies for your needs.

If you’re ready to find your perfect umbrella company, simply try it out for yourself today.

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Decision Making

Is PAYE Better Than Umbrella?

If you are considering contracting you will need to decide on PAYE or umbrella.

It can be a difficult decision to make and contractors will inevitably be questioning which option will be the best for them.

To help every contractor get on the right track for them, in this guide Umbrella Supermarket looks at PAYE vs umbrella, outlining the key differences and how this will impact you.

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Why Should Contractors use an Umbrella Company?

There are many reasons that contractors across the UK opt to work under an umbrella company.

Umbrella companies offer an easy way to contract and remove the need for the contractors to worry about the burdens of admin, finances, tax and IR35, all things that limited company contractors have to deal with.

For this reason, many contractors will be weighing up their options and questioning whether it is worth using an umbrella company in 2021. To help make the decision that little bit easier, Umbrella Supermarket has put together this guide on the pros and cons of using an umbrella company.


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Does an Umbrella Company Charge Fees?

Any contractor that is considering operating through an umbrella company in 2021 will need to understand Umbrella Company fees - from why an umbrella company charges fees, how they are paid to how much the contractor will pay.

In this guide, Umbrella Supermarket answers those all-important questions to help every contractor know exactly where they stand when it comes to umbrella company fees.


What makes a good umbrella company

What Makes a Good Umbrella Company?

If you’ve made the decision to contract through an umbrella company in 2021, you will next need to find an umbrella company that’s right for you.

After all, there are lots of umbrella companies out there, so how do you know which one to choose?

To help you find the best umbrella company for you, in this guide Umbrella Supermarket outlines what makes a good umbrella company, so you can rest assured you’re making the right move.

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Guide to Umbrella Company Pensions

One of the many advantages to operating through an umbrella company for contractors is that they become an employee of their chosen provider.

In turn, this means that the contractor will be automatically enrolled onto the umbrella company’s workplace pension scheme.

To help contractors find out more about umbrella company pensions Umbrella Supermarket has put together this handy guide.


using an umbrella company

Beginner’s Guide to Using an Umbrella Company

If you are considering contracting through an umbrella company you will naturally have questions and queries over how they work.

After all, making the move to umbrella can be a big step for contractors. To help, in this guide Umbrella Supermarket explains how to get started with an umbrella company and share our top tips for using one in 2021.


PAYE and Umbrella

Guide to PAYE vs. Umbrella

PAYE or umbrella is a question asked by every contractor. Which one you opt for will have a big impact on your contracting career and lifestyle. So, it's important to make the right decision for you.

To help makes things a little bit easier, Umbrella Supermarket has put together this guide on PAYE or umbrella, outlining the key differences between each, to help you make the best and most informed decision for you.

Holiday Pay for Umbrella Contractors

Complete Guide to Holiday Pay for Umbrella Contractors

One of the many benefits to working through an umbrella company is that you will receive holiday pay as well as a range of other statutory benefits including sick pay, maternity and paternity pay.

To find out more about umbrella company holiday pay, and how to calculate how much you will be entitled to, Umbrella Supermarket has put together this handy guide.

umbrella company

When Shouldn’t You Use an Umbrella Company?

Contractors must make several decisions throughout their contracting careers. One big decision contractors have to make is how they will operate.

One way that contractors can work is through an umbrella company.

Umbrella companies have become an increasingly popular way to contract in the past few years, offering many benefits to the contractor. But, how do you know whether this option is right for you?

To help every contractor make the right decision for them, in this guide, Umbrella Supermarket explains when not to use an umbrella company.


The truth about HMRC approved Umbrella Companies

There are tons of benefits to using an umbrella company, which is why they have become such a popular option for contractors in recent years.

After all, an umbrella company takes away the stress and hassle of operating through a limited company whilst offering contractors a range of advantages, such as statutory rights, paying them a salary, deducting correct tax levels and National Insurance, and taking care of tasks like expense processing and invoicing.

However, as more and more contractors opt to use the services of an umbrella company, more providers have started to claim that they are HMRC approved.

To bust the myths around HMRC approved umbrella companies and get straight to the facts, in today's guide Umbrella Supermarket look at whether HMRC approved umbrella companies really exist, so you know exactly where you stand.

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How Much are Umbrella Company Costs?

If you're considering making the leap to contracting, you will understandably want to know how much you will have to pay in umbrella company costs. After all, this amount comes directly out of the contractor’s pocket, so it’s important to be clued up on how much you should expect to pay.

To help contractors, in this guide Umbrella Supermarket answer the all-important question of how umbrella companies cost in 2021.