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Why More Public Sector Workers Are Turning to Umbrella Companies

Why More Public Sector Workers Are Turning to Umbrella Companies

by on March 30, 2023

It’s estimated that around 5.8 million people in the UK work in the public sector – that’s around 17% of the working population – and many of these people are now turning to umbrella companies as an employer. We look at why, and what advantages this method of working offers them.


Public Sector Statistics

The public sector is enjoying a boom in employment, with the total number of people working within it having increased, mainly because of the UK’s response to the COVID-19 pandemic, and its on-going aftermath. The latest figures from the Office for National Statistics (ONS) reveal that the sector which has seen the greatest rise is the central government which employed 3.61 million people (December 2022). 

The largest departments – the Department for Work and Pensions, the Ministry of Justice, HM Revenue and Customs, the Ministry of Defence and the Home office together employ over 344,000 people which accounts for two-thirds of the entire public sector workforce. 

The public sector offers contractors a wide variety of opportunities, in a range of roles, varying from Marketing to Technology, from Accounting to Human Resources, from Digital to Auditing and from Health & Safety to Finance and, ironically, due to the government’s own attempts to trim the workforce to save money from the public purse, the demand for contractors has actually risen over the last few years. 

With the increase in white-collar workers entering the sector as contractors many are choosing to work through an umbrella company – IR35 changes introduced in April 2000 have made this route necessary for many now that PSCs are also frowned upon. 


What can an umbrella company offer Public Sector Workers?

If you’re applying for a job within the public sector via an agency, an umbrella company is the ideal option for you. Public sector employers now have to insist that the contractors they deal with be employed, as opposed to being self-employed, and an umbrella company provides that employment status, especially if you choose one that is designed to take into consideration the unique circumstances that affect the people who work within that environment. 

Firstly, choose wisely. Look for an umbrella company that has a proven track record of dealing with contractors who work within the public sector and the agencies that place people within the sector.

Secondly, choose an umbrella company that will also understand implicitly and thoroughly the constantly-changing IR35 landscape, and the rules surrounding it. If you’re unclear about what your status is, given that end-clients are now responsible for determining your contractor status, you can use the Government’s Check Employment Status for Tax (CEST) tool here. In case of any difficulties, you can call Payme’s helpful and knowledgeable customer service team on 0333 200 0845 and speak to an advisor.

In order to fulfil your tax and National Insurance Contributions obligation, given that you will be working for the Government, you should also look for an umbrella company that is fully compliant. Not only does Payme adhere to all HMRC regulations but we’re also Freelancer and Contractor Services Association (FCSA) accredited. You can find our details here.

Finally, working in the public sector via an umbrella company can also provide you peace of mind through a range of benefits which are comparable to working directly for an employer including prompt and accurate payment, the option to pay into a private pension through salary sacrifice, and the reassurance that Payme will handle all of your tax and NI, so you can concentrate on the job at hand. 

If you’d like more information about the range of umbrella options that Payme offers get in touch here via our online form. Alternatively you can call us on 0333 200 0845 or email us at