Umbrella Company Contracts

Recruitment Agency Contract

When you are offered a contracting role by your recruitment agency, you may wish to negotiate certain terms. Your rate is the obvious one but you may also want to discuss:

• hours per day
• place of work
• length of contract
• termination period

You should read the contract carefully because once it's been agreed; it is unlikely either the client or agency will entertain any further alterations to the terms before the end date. 

When you are happy with the agency contract it will remain unsigned until your umbrella company signs it on your behalf.

Umbrella Company Contract

You would think that all umbrella companies would have roughly similar contracts, but they don't.

One advantage of being a contractor and working through an umbrella company is that you can off-set certain expenditure against your income tax, thereby taking home a higher net pay.

• Typical expense costs that you can claim for include what you pay to get to and from work each day (fuel for your car or train ticket) and the cost of food & drink.

The reason you can do this is because, as a contractor, your home is classified as your place of work and your client's premises are known as the temporary address from which you work.

• There are some ‘but's' with the biggest one being your future intentions.

Contract of Employment

Though there is no hard and fast rule on what you must work in any one year, however, it's generally accepted that HMRC will be happy with around 300 hours.

To legally bind all of this together your umbrella company should offer you an overarching Contract of Employment. This will be drawn up in such a way that you can legitimately reduce your tax bill.

In 2007, HMRC publicly welcomed the use of PAYE contractor umbrella companies by contractors so long as the company is compliant - that is, 'acting within the rules of HM Treasury as laid down in the Budget'.

It's not simple and certainly not all contractor umbrella companies do so.