Four decades ago, a person would leave school with whatever qualifications they had managed to get and thought about what job they wanted to do for the rest of their lives. The job market wasn’t inflexible, but there were certain openings dependent upon how well you had performed at school, whether that be in the classroom or in examinations. If you had done well, you might go into banking or into a profession like a solicitor, architect or a doctor. Having done moderately well, you could become a mechanic or office worker, and maybe build your way up through an organisation to management levels. If you didn’t do either of those things you could always do manual and mundane work.
But then the job market started to change. It really started with the sell-off of public-owned companies which became privately run and effectively ended the perception of a job for life. Companies now had to compete which meant that they had to be smoother in operation and run without any business ‘fat’. Redundancies rolled in and people suddenly found that they were without the work they had expected.
This coincided with harsh economic reforms and a general tightening of the government policies. With little other option, people were forced to review the way that they worked in order to survive and the job sector gradually changed to accommodate them. People were suddenly creating roles and charging different sectors for their expertise. The company contractor then came into being and started to transform the concept of work.
Employers liked the thought of contractors because they could take on staff with the skills they needed, but only for as long as they needed. A company might find that it needed a second accountant for a short period before the end of the tax year and could now find someone who was prepared to do the work for that time before moving on to a new role in a different company. Contracting added a flexibility that companies enjoyed and could make their business grow, and it became a growth industry in itself.
Contractors needed to find work and companies needed to find contractors, and so new companies, designed to allow the two parties to meet came into being. These go-betweens, known as umbrella companies, started to offer more than just introductions and for a small fee, would manage the accounts of the contractor, ensuring that they were paid on time and with the correct amount.
Changes to legislation in the UK, including the introduction of the IR35 test which effectively closed a tax loophole, has led to an increase in umbrella companies and in the number of contractors using them. They have become a sure way for the increasing contracting market to manage their finances and ensure that the correct taxes are paid.
Umbrella companies now handle many of the aspects of employment including accountancy services for their members. These companies are also becoming increasingly important as an intermediary to those seeking employment in the UK.