Choosing the best umbrella company
With over 150 umbrella companies in the UK, how on earth are you supposed to identify which is the best umbrella company? It’s a massive task, but we can help you!
Here are some tips to consider when trying to identify which is the best umbrella company. And, if you haven’t already, check out our top 10 umbrella companies for some of the best providers out there.
Every provider should process your pay in the same way
Umbrellas offer a PAYE payroll service, meaning they should all process your pay in the same way. The only thing that will vary between providers is the margin they retain for their service. For example, if you approach two umbrella companies and they both have the same margin, you should retain exactly the same amount of your pay – to the penny.
Therefore, our advice is this – don’t be fooled by a company offering you noticeably higher take home pay retention. Because all umbrellas process your pay in the same way – providers should be basing your take home pay illustrations on the same information. If a provider is offering you way more than another – the chances are they’ve manipulated your illustration.
We’ve heard rumours of contractors being given quotes based on them working every weekday in a year – without any holiday being taken into account. And, we’ve also heard that some umbrellas automatically include expenses in their take home pay illustrations. This is ridiculous! Frustratingly for contractors, a majority of umbrellas will not offer expenses as part of their service – because of the introduction of Supervision, Direction and Control. Basically, pretty much every contract assignments falls within SDC and as a result, 99.9% of contractors are not eligible to claim tax relief on travel and subsistence. Because the number of eligible contractors is so low – must umbrellas don’t even allow their employees to prove they’re not subjected to SDC in the workplace. Instead, they’re simply saying no – no expenses can be claimed. We don’t blame them.
Tip: Don’t be fooled by umbrellas offering you a high take home pay retention compared to others. They all process your pay in the same way and may be trying to mislead you. The margin is the only thing that will vary between providers, and therefore, it is the only thing that should impact your take home pay. The best umbrella company will be transparent and will make it clear how they have calculated your take home pay. If you have any questions at all – ask them how they’ve come to the figures they have. If you think they’re being deceitful – look elsewhere. We have created a useful umbrella company example and we recommend you check it out.
Compliant umbrellas will have your best interests at heart
We cannot emphasise this enough – you must use a compliant umbrella company for your payroll. Do not be tempted to use companies offering you unrealistic take home pay (sometimes upwards of 90%). These are tax avoidance schemes, and engaging with them could have devastating consequences. If you are working in the UK, it’s only fair to assume you’re responsible for paying UK taxes and National Insurance Contributions (NICs). Therefore, on average, you should expect to retain roughly 60% – 70% of your pay. If a company is offering you noticeably more, we urge you to avoid them at all costs.
The FCSA is the UK’s most recognised industry body dedicated to ensuring the supply chain of temporary workers is compliant and ethical. Every company that has achieved FCSA accreditation has successfully passed a series of assessments and audits. As a result, they’ve been able to prove they operate both compliantly, and in their clients’ best interests.
Also, depending on your circumstances, you may be keen to return to contracting through a limited company (and with the assistance of a contractor accountant). The best umbrella companies will make joining and leaving their service a piece of cake. They’ll welcome you with open arms, and allow you to leave easily and without questions. The door should always be open for your return to their payroll – should you decide to take an assignment that requires an umbrella in the future.
Tip: You must choose an umbrella company that is compliant and will process your pay in accordance with HMRC rules and regulations. The idea of retaining upwards of 90% of your pay may sound tempting. However, HMRC is stepping up their efforts to catch tax-avoiding contractors, and you could be faced with a substantial tax bill in the future. For more information on the risks of engaging with tax avoidance schemes, read up on the 2019 Loan Charge.
Customer service and track record
If an umbrella company has been around for a number of years, the chances are they’ve built themselves a fairly good reputation (but not always – do your research). We recommend you use an established umbrella, and one that has a professional accreditation. Have a look online and see if they have any reviews. Trustpilot and Google are excellent sources of independent and genuine reviews.
We recommend you give the umbrella you’re interested in a call before registering. Ask them any questions you have and find out exactly how they operate. This is a perfect opportunity to ask them about their service and to gain reassurances they’re trustworthy and dependable. If you are not convinced by the person on the other end of the phone – you should consider looking elsewhere.
Tip: We recommend you use an umbrella company with a proven track record. When deciding whether to use an umbrella company or not, have a look at their company background. How long have they been around? Were they founded by industry experts? Do they have good reviews online? Did they sound professional when you rang them? Were they knowledgeable and able to answer all your questions? What assurances have they made regarding customer service (e.g. will you have access to unlimited telephone support)? Are they popular and have you heard their name before? These are all questions you should ask yourself before choosing an umbrella.
What “extras” do they include in their service?
Umbrellas exist to process PAYE payroll. However, as the marketplace is becoming more and more saturated, providers are finding creative ways of enticing contractors and freelancers to choose them over the competition. Remember, umbrellas process your pay in the same way – so don’t get tricked by an inflated take home pay calculation. However, it’s only natural to want extras at no additional cost, and we recommend you see what’s on offer. Here are just some of the legitimate “extras” offered by compliant umbrella companies that you may be able to benefit from:
- Same Day Faster Payments – ensuring you’re paid the same day your umbrella receives your funds from your agency/end-client.
- Employee Discount Schemes – where you can get discounts online, eating out or visiting attractions.
- Unlimited Support – it may sound surprising, but some umbrellas don’t offer unlimited support, and you could be faced with a pretty long wait for answers to queries you have.
- Hidden fees – make sure the umbrella you choose has no hidden fees, including no joining or leaving fees.
- Referral rewards – some umbrellas offer small rewards if you refer someone to their service, or if you are referred by another contractor.
- Introductory offers – you may be able to take advantage of special offers for new clients, such as a few weeks free, or a low margin for a fixed period of time.
Tip: Firstly, only consider using compliant umbrellas. We promise you – the best umbrella companies are compliant. Secondly, when you’ve collated a small list of compliant umbrellas, see what “extras” they offer as part of their service. You may be able to find a real bargain and some useful “add-ons” that you previously wouldn’t have considered.
We hope the above will help you in your quest for the best umbrella company.
Remember – first things first – pick a compliant umbrella company. Then, compare them to others and see which one offers you the best value.
We recommend you take a look at our top 10 umbrella companies – it’s a great place to get some inspiration!