When you join up with an Umbrella Company, they'll offer you a contract. This is really important and you should make sure the contract they offer you is compliant with current legislation. You can do this by checking whether the following clauses are in your contract: 

"Your responsibilities include an ongoing duty to take all necessary steps to source new business for (the Umbrella company) in the form of suitable client assignments for you to perform under contracts between us (the Umbrella company) and third parties."

"You are obliged to work when we (the Umbrella company) require you to do so. We do not guarantee that there will always be a suitable client assignment to which you can be allocated, and you acknowledge that there may be periods when no work is available for you.  As a minimum we do however guarantee that you will be offered at lest 300 hours of paid work over the course of any full 12 month period of employment."

If yours has them you should be ok, if not be suspicious of the professionalism of your Umbrella company and question whether you want to continue to do business with a company whose lack of knowledge could end up with you fined and in trouble with the authorities. 

When you are offered a contracting role by your agency you may wish to negotiate certain terms. Your rate is the obvious one but you may also want to discuss: hours per day, place of work, length of contract and termination period.
 
You should read the contract carefully because once it's been agreed; it is unlikely either the client or agency will entertain any further alterations to the terms before the end date.
 
When you are happy with the agency contract it will remain unsigned until your Umbrella company signs it on your behalf.

You will have to sign your Umbrella company's employment contract, in order for them to be able to sign the agency contract, on your behalf. This means you can now go on site and start work (and in due course be paid).

You would think that all Umbrella companies would have roughly similar contracts, but they don't.

One advantage of being a contractor is that you can off-set certain expenditure against your income tax, thereby taking home a higher net pay. Typical costs that you can ‘claim against' include what you pay to get to and from work each day (fuel for your car or train ticket) and the cost of food & drink.

The reason you can do this is because your home is classified as your place of work and your client is known as the temporary address from which you work. There are some ‘but's' though, the biggest one being your future intentions.

If you just plan to do one contract and return to permanent work you cannot claim business expenses, and your whole income will be taxed. You can only take advantage of this tax break if it's your intention to make contracting a long-term career. For example, taking a second, then subsequent contracts one after the other.

Though there is no hard and fast rule on what you must work in any one year, it's generally accepted that HMRC will be happy with around 300 hours.

To legally bind all of this together your umbrella company should offer you an overarching contract of Employment. This will be drawn up in such a way that you can legitimately reduce your tax bill.

In 2007, HMRC publicly welcomed the use of PAYE Umbrella companies by contractors so long as the company were compliant - that is acting within the rules the Treasury laid down in the Budget. It's not simple and certainly not all umbrella companies do so.

Ask your Umbrella company for an ‘Overarching Contract' or you could be in trouble.

A contract is a form of communication. And although you might be told otherwise, there is no such thing as a "standard contract". A contract is a negotiation between two parties. Always. And negotiating a contract is not adversarial. There is no reason why both parties signing a contract should not feel that they have both won. It is important that a contractor does not feel that the outcome of a contract negotiation will be either that he/she has defeated the other side, or that he/she has been defeated by the other side. In fact, you are better off if you keep your feelings out of the negotiations entirely.

 

There is no reason why contracts should be imposing or unintelligible; it is crucial, however, that they cover thoroughly all of the issues and be precise in their language. If a contractor is told that he/she will be paid up-front, then in addition to the amount of payment, the deadline for payment should clearly be stated in the contract. Avoid also vague or imprecise language, as well as language that says more or less than what you intend to say. The process of negotiating and preparing a written contract is an opportunity for both sides to identify and address all of the business points, issues and concerns. Remember, honest people can differ vehemently over an issue, which neither really considered an issue at the time they entered into an arrangement.

 

It is worthwhile to consult with a lawyer in preparing agreements, particularly where the contractor is not experienced in writing or negotiating agreements, or is simply "new to the business". A lawyer should not have to spend a great amount of time in preparing a contract, particularly if the contractor  provides the lawyer with a draft of what is proposed or an outline of business points to be covered by a contract. The lawyer can react to the draft or the list of business points, and sometimes discussions between the lawyer and the contractor will uncover important issues which the contractor had not thought of before, but which clearly should be addressed in the final agreement. In all instances, the lawyer should be consulted before any document is signed, and before the contractor makes a binding commitment of any sort to the other party.

 

It's pretty easy for a major company to intimidate a contractor working by him or herself, but there is something you should know: I've asked every contractor I contacted while researching this article, and no one has ever lost a job because they wouldn't accept the terms of the original contract offered them. In fact, one contractor was so insulted by a contract, that he packaged it up along with an angry letter, telling the potential client never to darken his door again, and he still got the job, but on his own terms.

 

So don't be afraid to stand up for your rights for fear that if you don't accept whatever you're given, you won't get the job, and the client will just go to another contractor who will. There is no evidence that this ever happens. For whatever reason, if a client has sent you the contract, and you're available to do the work, the job is yours, so long as you are willing to re-negotiate reasonable terms in a timely fashion.