Making the switch from permanent employment to contracting can be one of the most exciting times of your career. The first major decision you need to make as a contractor is how to operate; do you work as an employee of an umbrella company or through your own limited company? You may be wondering, which option is the best for you? Thankfully, help is at hand. We have all the information you need from the experts at Parasol, including the pros and cons of each pathway, so read on for advice to help you make a well-informed decision. What is an umbrella company? An umbrella company is an excellent choice if this is your first venture into contracting or you’re planning on only contracting for a short period of time (for three-six months, for example). The main reason many contractors choose an umbrella company is the ease of use and less administration. If you decide to go down this route, you are considered an employee of the umbrella company. You will receive a contract of employment; as well as giving you peace of mind, this also entitles you to the benefits given to a permanent employee. This includes: Holiday pay Sick pay Maternity/paternity pay As well as receiving these benefits, you will also be able to claim business costs and expenses. The only drawback is that you can only claim these back if they are incurred during an assignment. Advantages of working as an umbrella employee Working as an umbrella employee can be the simplest way of operating whilst you’re contracting. The umbrella company will automatically deduct Income Tax and National Insurance contributions on your behalf, so once you receive your salary, the money is yours with no need to worry about additional liabilities. What is a limited company? A limited company is a company which you can set up in order to carry out your services. They have their own legal identity; this allows you to own company assets as well as having a business bank account – this account must be separate from your personal finances. If your limited company makes any profit, it then owns this profit. Although contractors working through a limited company can receive more money than those working under an umbrella company, this increase in income is a result of slightly more paperwork each month. You will need to raise your own invoices with your client and – with the help of your accountant – make your own National Insurance and tax contributions. Advantages of contracting through a limited company Forming your own limited company and working as a limited company director can be the most tax efficient way of working. In terms of expenses, limited company directors are also able to claim on a bigger selection of expenses than those working through an umbrella company. Forming a limited company gives you the ultimate control over your business finances, providing the freedom you perhaps first expected when you decided to become self-employed. Working as a limited company director is a great option for those who are planning on contracting for the long-term. A quick overview of both options So far, we’ve explored both contracting under an umbrella company, and through a limited company. It’s now your choice to take charge of your career, and decide which way is best for you. To summarise, an umbrella company could be the best option if you’re new to contracting and want to avoid the hassle of paperwork. It is also the best option for you if you’re intending on contracting only for a couple of months at a time. A limited company does come bundled with slightly more paperwork and added responsibility but if you’re planning on contracting long-term working through your own limited company could be a great option. Helping you decide Whether it’s a limited company or umbrella company you choose, we hope our guide has been useful in helping you decide which option fits you best. For a tailored recommendation, leading umbrella company Parasol offers a set of simple questions designed to point you in the right direction. You can also contact our Head of Contracts Alex Martuccio by email email@example.com or by phone 01727 228 244. Check out our latest contract roles here.
Mike Sowerbutts is the Head of Engineering at White Springs, a technology provider dedicated to improving sales performance. They employ approximately 20 employees across offices in London, Banbury, Oxfordshire and San Diego. After ten years of progressing through the ranks at White Springs, Mike took on the Head of Engineering role with the challenge of recruiting a permanent team of highly skilled software development professionals to be based out of the Banbury office. I wanted to interview Mike and find out how he did it and what advice he would give others who face similar challenges in this talent short market. JM: Hi Mike, thanks for taking the time out to speak to me. MS: No problem James. Background JM: First off Mike tell me about yourself. MS: I studied IT & Media at Lancaster University and was based in Oxford before I joined White Springs in March 2009. I then moved to Banbury in order to be able to walk to work, it’s been a long time since I’ve had to jump in the car and commute to work! I now live just outside of York. JM: But that’s quite a commute isn’t it? MS: It’s a good drive yes – but pales in insignificance to a daily commute, given that for the majority of those years, I have been 100% remote! The Challenge MS: Moving into the Head of Engineering role and realising the CEO’s ambitions it was quite clear we had to scale up our team and that two developers wouldn’t be sufficient to deliver on the projects we had lined up. JM: So, what was the plan? MS: I needed to hire six people including a Technical Lead to be based out of our Banbury office. JM: And how did you start to go about doing that? MS: Well, I went out to some recruitment agencies and I managed to make one hire inside the first couple of months. JM: That was good then... MS: Well yes and no. From looking at the candidates and interviews we conducted to make just one hire I wasn’t convinced that I could find another six hires of sufficient quality in the right location within the timescale required. I was ideally looking for experience of microservices, Entity Framework and .NET Core 2.0. I needed to change something… The Solution JM: So, what did you do? MS: I decided to expand the criteria to include the hiring of remote developers who didn’t need to be within a commuting distance of Banbury. JM: Ah okay. What experience, if any, have you had of remote workers previously? MS: I’m one! When I moved to Yorkshire from Banbury I asked to work remotely and while there was initially some hesitation and resistance, the company did have some people in other departments doing it as well as some employees working out of the US so the decision was made to allow me to do it. JM: I’ll come onto what some of that initial reluctance was down to later but for the moment, tell me what your experience was from a recruitment perspective after relaxing the location criteria. MS: I hired the six further people I needed within the timescales I had! I also hired a new recruitment agency to help me as well. JM: What made you choose the recruiter you did? MS: I liked the recruiter, he came across as trustworthy and not too pushy and thankfully he turned out to be able to find the calibre of people I needed. JM: And what did you find with regards to the new candidates that you saw? MS: I started seeing a larger pool of high-quality candidates than I had done previously. It allowed me to be more selective and certain about who I selected as I knew I had more people to choose from. If you are not careful you can hire people for the wrong reasons, i.e. they live locally even if they are not the best for the job. JM: Okay, great, that makes sense. While it seems an obvious positive that you get more candidates to choose from, what about the negatives you hear about employing remote developers? For example, I’ve heard that productivity slumps? Remote working MS: That hasn’t been an issue. I’ve found that by being more flexible and by hiring the right people they don’t take the mick. JM: Trust people until they give you a reason not to then. What about still being able to foster that team culture and effective communication when everyone isn’t in the same location? MS: I’ve been the sole remote working employee in a team previously and that is difficult, especially when your line manager isn’t the biggest fan of remote working. However, when everyone in the team is remote it becomes easier. We use Microsoft Teams (allows multiple communication channels, syncs through Outlook…) to foster collaboration while also having an open chat where we can have some non-work communication and share our love of Star Wars etc! That may become more difficult with bigger teams but for the size we have it works. We also get together at least once every 2 months and go to developer conferences etc. JM: Sounds great! I’ve also heard that companies are concerned about sensitive data becoming unsafe through the use of remote workers – what do you do to mitigate this? MS: We use BitLocker (a full volume encryption feature included with Microsoft Windows) and Microsoft Intune (a device management solution) to handle this. Hiring JM: How would you summarise the impact that offering remote work has played in your hiring efforts? MS: It’s definitely been advantageous. I always ask our current developers for any negatives / improvements but there hasn’t been anything up to now. Given that all of them were 100% office based in prior positions, this is telling JM: And what about the interview process Mike, has that had to change? MS: Not too much, I do a telephone interview first (anything from 20-60 mins), then invite them in to Banbury for a face to face interview including technical tests). Though sometimes it makes more sense to interview at a location closer to both of us. Fortunately the recruiter I worked with was able to provide a space for this. And finally... JM: Thanks a lot for taking the time to do this Mike, finally, for anyone reading this who is considering hiring remote developers what tips would you give them? MS: Okay, first one – look for more than just skillset. If someone’s personal skills are poor then working remotely doesn’t mitigate this, don’t change your team & cultural fit requirements just because they aren’t going to be in the same office. It’s still really important to get the right fit for the team. Secondly, ask the candidate where they plan to work from. You don’t want someone who says the sofa! Someone who can separate themselves from family distractions when needed and ideally has a separate work space is better. It shows they are taking it seriously as well. And finally you need the candidate to have fibre broadband so it’s worth checking their location, connection and speeds. JM: Mike that’s great and I’m sure people reading this will find it really useful to help overcome any hiring challenges they have at the moment. MS: No problem James, speak soon. For more information about White Springs and what they can do for your sales performance click here or contact them on 020 7754 5924. If you wish to discuss your tech recruitment strategy and how to overcome any current hiring challenges you have then please contact myself, James Mills, on 01727 809 074, firstname.lastname@example.org or www.linkedin.com/in/jamesmrecruits