Should you bother switching umbrella companies?

Amazingly, there are over 500 umbrella companies in the UK. Therefore, there is plenty of choice for contractors and freelancers when choosing a company for their payroll. However, if you find a better deal elsewhere, or your current umbrella company is performing disappointingly, should you bother switching umbrella companies? We’ll help you answer this question.

The answer is quite simple – yes. If you find a compliant umbrella company offering a lower margin, or you’re not getting value for money from your current provider, you should consider switching umbrella companies. Here are the main points to remember.

Switching umbrella companies is easy

If you decide that switching umbrella companies is a priority, the processes involved are pretty straightforward. All you need to do is let your existing provider know that you’re leaving them, and then approach the new umbrella company and let them know your circumstances. Don’t forget to let your agency and end-client know as well.

You’ll need to register with the new umbrella company, which will involve completing some forms and providing personal data – such as a copy of your passport or driving license for ID. If you’re from outside the UK, you may need to prove your right to work it in the UK, such as a VISA.

The only thing that should impact your pay retention is the umbrella company’s margin

Remember, the only thing that should impact your actual take-home pay between compliant umbrella companies is the margin they deduct for processing your payroll. Therefore, switching umbrella companies may be an attractive option if the umbrella you want to move to has a substantially lower margin. However, if you’re considering switching to save a few pennies – ask yourself if it’s worth it. Your take-home pay will only be ever so slightly higher with an umbrella company with a £15 weekly margin, compared to an umbrella with a £20 weekly margin. However, if you’re committed to a £35 per week margin, for example, and you come across a compliant umbrella with a £15 margin – it may well be worth your while finding out more!

Compliance is critical

It’s crucial that you only use compliant umbrella companies for your payroll. While most UK-based umbrella companies are compliant and offer a service in line with HMRC’s rules and regulations, some offer tax avoidance schemes. Using a tax avoidance scheme could land you in serious trouble, and you could face life-changing fines in the future. Don’t be tempted to use an umbrella that’s advertising unrealistically high take-home pay retention because they’re almost certainly a tax avoidance scheme.

We recommend you only consider switching to an umbrella company that is accredited by the FCSA or Professional Passport.

Umbrellas pretty much offer the same service, but some will have some “extras” to increase their value proposition

The umbrella company marketplace is pretty saturated. There are over 500 umbrella companies to choose from – so how do you know which one is best for your circumstances? Firstly, make sure you choose an umbrella company that is compliant with HMRC. Secondly, find out what the margin is – as this is the only thing that should affect your pay retention between umbrella companies. Thirdly, see if there are any extras available as part of an umbrella company’s service.

As there are so many umbrella companies, most of them will offer “extras” to entice contractors and freelancers to use their service over a competitor. See what’s out there, but these “extras” can include:

  • A certain number of weeks free (£0 weekly margin) – as a welcome bonus
  • Discounted margin
  • Same Day Faster Payments
  • Access to an Employee Reward Scheme – you could save money when shopping online or on the high street, and get special discounts when eating out and visiting UK-based attractions (including cinema and bowling alleys).
  • Account Manager

Top 10 umbrella companies

If you’re interested in switching umbrella companies, why not check out our top 10 umbrella companies? Some of them have amazing offers now, and they’ll help ensure the switching process runs smoothly. And, they’re all accredited by the FCSA – so you’ll be in the safest hands.

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Click here to see our top 10 umbrella companies!

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