Umbrella companies are a modern offer to workers preferring being on their own without having to deal with hard administrative stuff. This method that generates more employment has already proven its worth. Indeed, many countries have experienced it and since then their popularity hasn’t stop growing, e.g. Sweden, France, Nederland…
Technically an umbrella company is a company that provides payroll services to individuals contractors. These companies allow workers to get free about bills, to pay taxes or national insurance, and to submit expenses to the government. The umbrella company acts as an employer to contractors who are in a contracted assignment, most frequently through a recruitment agency. It controls that you get paid by sending an invoice to the recruitment agency (or client) after receiving a timesheet from the contractor. The recruitment agency pays the umbrella company which pays the contract back.
Originally these companies came from managed service companies ( MSC) which is a general term defining the structure gathering contractual workers who fill a permanent position in a company but doesn’t pay the corresponding income tax and National Insurance contributions (NIC) that a permanent worker would. Since the British government introduced it with IR35 legislation in 1999, umbrella companies have been largely developed.
Many reasons can explain the choice of an umbrella company for a worker: from the entrepreneur to the freelancer, umbrella companies answer to different types of aspirations. But it also concerns workers that can’t afford abandoning the employee status like in France the « portage salarial » was created by unemployed persons who still wanted to conserve the legal security of having an employee status.
Even though there are still many countries that haven’t discover yet this new way of working, umbrella companies promise to be into the limelight because of its combination between workers interests and companies need of flexibility.
Even though the « portage salarial » began to be practiced in the 90’s, this French system of umbrella companies had been legalized only in 2008. These companies were originally created by unemployed persons and more particularly executive workers (middle manager) who didn’t want to lose the legal security of an employee status. Therefore, these companies offer the possibility for workers to be on their own and being at the same time considered as employees. In that sense, French system is quite similar to the British one.
However in a functioning point of view there are some divergences. Indeed, the French system doesn’t include recruitment agencies. The « portage salarial’s » system concentrates only three actors: the portage salarial company, an independent worker that contracts with this one and a client who receives the corresponding services.
The worker conserves all his independence in his mission’s researches and in the following negotiations with the clients. The portage salarial company not only frees workers from the whole administrative stuff related to the contract, but it also provides support training so that they can find missions easier.
Recently, the ministerial order of the 8th June 2013 has provided a more secure framework in which only executive workers who earn at least 2900 euros average per year can benefit of all the guarantee of the system.