Growing Numbers of UK Contractors are Using PAYE Companies

August 23, 2013

England 12/08/2013 – The makeup of the UKs workforce is continuing to evolve with more people opting to work as contractors.

The UK has over 4 million temporary workers. These people do not have a long-term contract with their employer. They effectively work for themselves, which means that they are responsible for filing a tax return and paying their own National Insurance. The ways in which people are working for themselves varies, some are sole traders, others work as an Ltd company with themselves as the only paid employee and still others work as contractors and freelancers. Of the latter group, the vast majority choose to work via PAYE companies, which are also known as umbrella companies. They do so to ensure that they pay their dues, but do not pay more than they need to in tax and National Insurance contributions.

As more and more of the UK’s workforce are moving away from working for others to being self employed, the use of PAYE companies is increasing. People are increasingly struggling to find permanent work. Many employers are now moving away from offering permanent contracts.

Increasing numbers of firms believe that doing so is the best way to keep their labour costs under control. In many cases, the employee is responsible for paying their own tax and National Insurance, which is better for the employer. In addition, if the contract is short enough there is no obligation to pay for things like sickness, holiday pay and maternity leave.

The make up of the UK’s contractors
Many are unsure of this way of doing business, but with both jobseekers and employees, actively opting for this work model most believe that it is a way of working that is here to stay. Compared to its European neighbours the UK has a much larger independent, or contractor workforce. In most other European countries, very few people work on temporary contracts. The make up of the temporary workforce also varies more in the UK than many other countries. Firms like i-Paye who provides accounting and umbrella services for contractors and freelancers have a mix of white collar and blue-collar workers on their books. Nearly half of the UK’s contractors and freelancers are professionals working in the legal, IT, architectural and other white-collar professions.



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