Umbrella contracting – dos and don’ts
Umbrella contracting has become an increasingly popular solution on the labour market, with both employees and companies recognizing the value in combining freedom and good conditions. But as with everything else, umbrella contracting also has its dos and don’ts. Let’s take a closer look at some pointers for umbrella contracting.
Lets’ start with the basics – what is umbrella contracting?
Umbrella contracting is a popular option when taking on assignment-based work – what in popular speech often is referred to as freelancing. Somewhat simplified, it can be thought of as a hybrid between having your own company and being employed: you are offered the same independence as in self-employment even though you don’t have your own company. Instead, you have an employment at the umbrella contractor for the time of an assignment, being given the same social security as a traditional employment.
Needless to say, there are both up- and downsides when comparing self-employment with umbrella contracting. When looking at why people turn to umbrella contracting, a few things, however, stand out. In addition to being considered a “simpler” and less time-consuming option, studies have found that umbrella contracting also caters to peoples’ wishes to avoid risk and additional responsibility.
Sorting out the terms
Translations can be confusing, and that’s definitely the case here. So, what do the English freelance terms translate to in Swedish?
| English | Swedish |
| Umbrella contractor | Egenanställd arbetstagare |
| Self-employed | Egenföretagare |
| Sole proprietorship | Enskild firma |
| Own business, own company | Eget företag |
Considering umbrella contracting? Here are some things to take into account!
Whether you’re preparing for a job interview, buying a new apartment, or exploring a new city there is always some form of dos and don’ts. You know, some guidelines that helps you avoid the pitfalls and get the most of an experience. That being said, below are some things to consider when it comes to umbrella contracting. Let’s start with the “don’ts” this time, cause in this case they are probably the most important points to keep in mind.
| Don’t forget that the umbrella contractor will be your employer for the time of the assignment. As with traditional employers, a good one makes sure that you have good conditions, encompassing insurances, a fair wage, sick pay, work environment controls, etc. A bad one doesn’t. | |
| Don’t use an umbrella contractor that has not been authenticated according to a set of governing standards. This follows from the point above. Essentially, authentication helps you sort out the bad apples. Choose carefully to ensure that your health, wellbeing, and salary payments is taken care of. | |
| Do use umbrella contracting as you want. Needs and situations differ, but regardless of if you’re a fulltime employee taking on some extra freelance gigs or want to pursue your new business idea with full force, umbrella contracting allows you to do you. | |
| Do use umbrella contracting when you expect to make less than SEK 1,000,000 in revenue. It is significantly cheaper and much easier than starting your own business. | |
| Do be wary of umbrella contractors with unreasonably low fees. Generally, a serious umbrella contractor keeps somewhere between 4 and 8% of your total invoice amount to cover legal compliance, insurances, and support services (i.e., some rely solely on automated chatbots, while others offer a customer support with personal service). | |
| Do research on the reputation of the umbrella contractor. Look at reviews (Trustpilot is always a good start), testimonials and ask around in your network to gain an impression from previous experiences. | |
| Do pre-register your assignments, so that the umbrella contractor can ensure that the client meets demands on working conditions and work environment and that you have the right to sick pay. |
Are you on the other side, looking to hire assignment-based workers or freelancers?
Well, the essence of the pointers above goes for you as well. Not the least: do your due diligence on different umbrella contractors to dodge the ones who are uninterested in taking responsibility for good conditions. This is not only to ensure good conditions for you freelancers, but also to avoid collaborators that risk end up reflecting poorly on your brand or reputation.
Article by: Frilans finans
