Below we are going to speak about the advantages of working via an umbrella company located in Serbia. Before we proceed, however, we have to disambiguate the term ‘umbrella company’ because it can be used in two different meanings.
‘Umbrella companies’ in the bad sense
The phenomenon referred to as ‘umbrella companies’ in Great Britain, caused a lot of public disturbance in the country a couple of years ago. The term is used to describe companies that pay wages to outsourced employees. In order to make the workers use the company’s services, umbrella companies pay commissions to recruitment agencies. The ultimate cost is covered by the worker, of course. Some estimations suggest that an average worker who gets paid by an umbrella company spends 15 pounds per month on its services. Currently, about a half of all recruitment agencies in Great Britain are involved in this scheme.
Trade unions believe that umbrella companies must be made illegal. In their opinion, they are ruining the traditional labor relations in the country. What is an umbrella company in the bad sense of the word? This is a company whose only task is to pay salaries to the workers employed by them only on paper. It must be admitted, however, that some of the umbrella company employees work for the company in reality. This is to be expected because the umbrella company has to navigate between the worker, the recruitment agency and the ultimate employer.
There is no legislation in Great Britain (as well as most other countries) that would regulate the activities of umbrella companies. Consequently, their activities can take many different forms. How does it work in practice? Let’s suppose that a person works at a factory. By the documents, however, he or she is a staffing agency employee. The umbrella company calculates the person’s salary and transfers the money to him/ her. The umbrella company charges the worker ‘a service fee’. If you refuse to sign a contract with the umbrella company, you won’t be able to get a job at the factory. What is more, the recruitment agency will cooperate with the umbrella company for a fee only and the fee is going to be quite substantial. The sad thing about the situation is that both the umbrella’s company commission and the recruitment agency’s commission has to be covered by the worker: he or she has to give away part of their monthly salary. Shortly speaking, ‘if you want a job, give us a cut of the money’. Is it different from racketeering? It is: racketeering is mentioned in the legislation and it is qualified as an illegal activity. Umbrella companies are not mentioned in the legislation.
‘Umbrella companies’ in the good sense
The phrase ‘umbrella company’ can also refer to the type of company that has nothing to do with racketeering and recruitment agencies. Instead, it describes a wonderful business opportunity for those who would like to sing official agreements with customers without forming any legal entity.
How is that possible? Instead of opening your own company, you can actually rent one and work via an umbrella company in Serbia or in some other country. How does the scheme work? A company that is registered with the local Business Register, has employees and a corporate bank account, can sign contracts on your behalf and you will provide services to the client who signs the agreement with the company. Alternatively, the umbrella company can sell goods to customers on your behalf. The contracts that are signed in the process will contain the details of the umbrella company, not your personal details.
When you do the job and your client makes the payment, the umbrella company will transfer the payment to your account. What sounds truly fantastic is that you don’t even have to have an account with a traditional bank! The money can go to your electronic wallet or the account that you have with one of the Payment Service Providers.
Another big relief for you will be the opportunity to get rid of the red tape. We do not mean to suggest that no paperwork is involved in determining the terms and conditions of your cooperation with the umbrella company. When this issue is settled, however, you will never have to worry about keeping the books and submitting tax returns. The umbrella company will have an Accounting Department and its officers will do the accounting and reporting job for you. Doesn’t this sound fantastic?
The phrase ‘umbrella company’ sounds much more appropriate in its positive sense rather than the negative one. Indeed, the company serves as an umbrella that shields and protects a large number of private entrepreneurs by sparing them the need of registering a company, opening a corporate bank account (which can be a challenging task these days), keeping the books, and submitting financial reports.
In addition to that, the umbrella company personnel are going to make sure that the business operations that you conduct and the services that you provide are legal. Yes, the contracts that the company is going to sign on your behalf will be in full conformity with the legal requirements that are applicable in the particular country. We have to note at this point, however, that you cannot work via an umbrella company if your business activities require a license. This restriction is, in fact, just one more instrument of legal protection for the company’s partners.
The opportunity to work via an umbrella company should be of an especially high value for freelancers working internationally. No matter what your country of residence is, you can hire an associate in a foreign country with the help of your umbrella company. As you probably know, labor regulations are different in different countries and your umbrella company can do even more for you than hiring an associate in a foreign state. It can fire him/ her while complying with all national regulations governing the firing process. Some national legislations protect hired personnel very well and you might find the task of firing a foreign employee on your own. Your umbrella company’s lawyers, however, will know how to do it in accordance with the law.