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Less than a sixth of freelancers use umbrella companies

Paraplus is a fair and transparent umbrella company that helps contractors save money and time via PAYE

According to new statistics, only 15.5% of UK freelancers are using payroll umbrella companies. This equates to over 1.35 million freelancers in the UK who are currently not using umbrella companies to help them manage their PAYE and tax requirements.

The survey asked 2,000 freelancers in the UK about their perception and usage of umbrella companies. It was commissioned by Paraplus, part of de Poel, the UK’s largest procurer of temporary agency labour.

The findings outlined that despite awareness of umbrella companies and their services being high in the freelancer community, usage was relatively low. The main concerns revolved around paying for an umbrella company and a misunderstanding over the role and benefits of these types of companies.

Worryingly, 11.5% of respondents, which equates to 184,000 freelancers, also outlined that they were concerned about how umbrella companies manage their wages. Many highlighted that they were worried mistakes could be made, making them liable for tax demands at a later date.

Phil McDonald, Managing Director of Paraplus, comments:  “These findings should be a wake-up call for the umbrella industry. They show a clear requirement to educate prospective customers about why they need an umbrella company; it makes for tough reading that 26.5% of freelancers don’t understand exactly what an umbrella company does and 14.5% don’t even know that one could help them.”

“The findings also demonstrate a real need to rebuild trust by raising industry standards. For too long, a few rogue operators have given our industry a bad name. In actual fact, we should be there to help and support the freelancer; saving them time and money, whilst ensuring they’re compliant to legislative and HMRC guidelines. It’s time that we out players that don’t want to play by the rules to restore trust with the people that matter most – our customers.”

The research did outline that from the 15% of freelancers that were using umbrella companies, many were aware of the benefits; with 69% of respondents stating that maximised income was the main benefit of using an umbrella company and 19% of respondents outlining reduced administration as the key reason for using an umbrella company.

Freelancer calculations
Calculations of freelancers are based on the 1.6 million freelancers who are currently working in the UK – according to The Professional Contractors Group: http://www.freelanceadvisor.co.uk/getting-a-job/an-in-depth-look-at-self-employment-figures-in-the-uk/

Research findings

  • 15.5% of freelancers use an umbrella company
  • Of the freelancers that are using them:
    • 69% stated maximised income is the main benefit of using an umbrella company
    • 19% stated reduced admin is the main benefit of using an umbrella company
    • Of the freelancers that aren’t using an umbrella company:
      • 42.5% say that they don’t want to pay for an umbrella company
      • 26.5% say they don’t understand the role/ the benefits of an umbrella company
      • 16.5% say that it would give them less control over paperwork
      • 14.5% didn’t feel they needed the help of an umbrella company
      • 11% of freelancers have concerns about how umbrella companies operate

About Paraplus

Paraplus is a fair and transparent umbrella company that helps contractors save money and time via PAYE. They offer a tax efficient solution that helps contractors maximise their income and manage their admin, operating to the lowest margins in the industry.

Paraplus is part of de Poel, the UK’s largest procurer of temporary agency labour. de Poel works with a third of the UK’s recruitment industry and has a prestigious client base, including Sainsbury’s, Carlsberg and Centrica.

 

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