In the simplest of terms, an umbrella company is a third party that stands between contractors and the companies that employ them. It handles payroll, helps with tax issues and makes sure everyone stays compliant.
When a company wants to hire foreign contractors in a another country where they either do not have a legal entity, or do not have the knowledge or resources to deal with payroll, it can seem like an impossible task. And any contractors working in another country are at a risk of running afoul of employment and tax compliance if they are not familiar with that country’s regulations. Both of these issues can be quite easily solved by engaging in the help from an umbrella company.
How it actually works
In effect, the umbrella company is the contractor’s actual official employer. They sign the employment contract, they take care of payroll, and provide complete employment rights including social security benefits, personal and sick leave pay, retirement, even certain HR services. They are knowledgeable in the laws and regulations of the country they are based in, and have the skills and means to make sure that everything is above board.
The contractor submits either time sheets or invoices to the umbrella company, who in turn bills the client. After taking care of all payrolls requirements, including the deduction of any and all social security contribution and taxes (plus their fee), the umbrella company pays the contractor. The contractor receives his paycheck, the client company receives their work, and everyone ends up happy.
How it helps contractors
When you are officially employed at a company, you can get quite a lot of benefits – financial stability, paid time off, 13th salary, expenses for things like travel, health insurance: the list goes on. While contracting can offer a higher payout, it is still not permanent, and there are things you can miss out on.
With an umbrella company – you get the best of both worlds. Since the company acts as your official employer, you can enjoy the same benefits as a salaried employee. In addition, the umbrella company can help with tax calculations, social security contributions, expense reports, various HR benefits and any other compliance requirements. All you have to do is complete the work and submit your timesheets/invoices.
About Access Financial
Access Financial is the leading global provider of contract management, outsourced payroll and umbrella services. We offer customised and compliant solutions to corporate clients, recruitment agencies and professional contractors. We specialise in mitigating tax liability, fully subscribing to labour law and supporting immigration.
The numerous benefits of partnering with Access Financial as your trusted provider include:
- Boosting take-home pay;
- Minimising administration for contractors, recruiters and corporates;
- Providing customised software for better payroll management;
- Ensuring compliance with all relevant laws and regulations;
- Providing complete data security and confidentiality of all payroll information.