Should You Bother Transferring Umbrella Companies?

Should You Bother Transferring Umbrella Companies?

Transferring umbrella companies sounds stressful. However, you may be surprised to know that it’s pretty easy, and your new umbrella will support you throughout the process. Please keep reading, and we’ll summarise the steps involved when transferring umbrella companies, and we’ll help you decide whether it’s worth moving or not.

When should you consider transferring umbrella companies?

Before we look at how you instigate a transfer to a new umbrella company, it’s essential to understand what level of service you should (and should not) be receiving from your umbrella company. There are plenty of reasons transferring may be in your best interests. Please consider the following before deciding if you’re going to move umbrellas or not.

Company background

We recommend you use an umbrella company with a proven track record of providing a reliable, compliant payroll service. If you’ve joined a new umbrella company and they’re failing to provide a high standard of service – you should consider moving to one with more experience and a better reputation.

PAYE

All compliant umbrella companies operate Pay As You Earn (PAYE), the government’s tax system. Therefore, assuming the umbrella you’re currently using pays you compliantly (PAYE), moving to another umbrella is unlikely to see you retain more money. However, the only thing that can alter your pay retention between compliant umbrella companies is the margin. Therefore, don’t look to jump ship to a company offering you inflated pay retention because they’re almost certainly lying or operating a tax avoidance scheme (and these should be avoided at all costs).

The umbrella company margin

As mentioned above, the only thing that’ll impact your pay retention between compliant umbrella companies is the margin they deduct for processing your payroll. For example, if a compliant umbrella has a £30 per week margin, you’ll retain more of your salary if you are paid by a compliant umbrella company with a £15 per week margin instead. However, if you were to use two umbrella companies, both with a £30 per week margin, you should retain the same amount of your salary with each – to the penny.

Friends and colleagues

Do you have any friends or colleagues paid by an umbrella company? It’s well worth asking around for recommendations because word of mouth is still such a valuable tool. It’s also worth noting that some umbrella companies offer little rewards for referring a friend (e.g. you could both be eligible for a few weeks with the margin repaid to you – as a thank you).

Holiday Pay

When you join an umbrella company, you’ll probably be given two options regarding Holiday Pay. The first option is to have it retained (held back, or accrued) and paid in a lump sum – when you want it. The second option is to have it paid to you each time the umbrella processes your payroll (from our understanding – this is the most popular option). The Holiday Pay you see on your payslip is your money – not the umbrella companies. While 99% of umbrella companies will handle Holiday Pay responsibly and help you claim it in your best interests – a few umbrella companies have been accused of unethically retaining Holiday Pay. This is appalling. Therefore, if you think your current umbrella is non-compliantly handling Holiday Pay – you should report them immediately and look to transfer to a new umbrella.

Payment frequency

Before you are paid for the first time, you should understand your payment frequency, meaning you know when you will be paid (weekly, fortnightly, monthly, etc.) A majority of negative reviews that umbrella companies receive are due to delayed payments. However, it’s not always the umbrella company’s fault if they fail to pay you on time. It could be the fault of your recruitment agency because they may have missed the payment deadline to the umbrella. Many umbrella companies will not pay their employees until they’ve received the funds from the agency – and who can blame them? Before you consider transferring away from an umbrella because of late payments, we recommend you get to the bottom of who is responsible for them being late. Sure, it may be the umbrella (in which case, move at your earliest convenience). However, the agency may be the party at fault.

Customer service

It’s fairly obvious to say this, but if you are struggling to get hold of your umbrella company by phone or email, or they’re failing to meet your high standards, you should consider transferring away. Have a look online at the reviews of your existing umbrella company and any that you’re considering moving to.

Accreditations

With over 500 umbrella companies in the UK, how do you know which ones are reliable, and which ones you should avoid? There are two self-regulatory bodies in the sector – the FCSA and Professional Passport – and we recommend you only consider using umbrella accredited by one of these organisations. More information is below.

Unusual payment arrangements

As mentioned above, compliant umbrella companies process payroll in accordance with HMRC’s tax system PAYE. Therefore, if your umbrella company is paying you using a different method – alarm bells should be ringing, and you may be enrolled in a tax avoidance scheme. Please check your payslips carefully and look for anything unusual – for example, payments stated as loans, credits, or anything else that sounds out of the ordinary. If you have any concerns, seek assistance from HMRC and transfer immediately.

Remember, tax avoidance schemes could land you in serious trouble with HMRC down the line and are not worth the risk. And sadly, in some cases, workers have been using unethical umbrella companies against their knowledge (another reason to use an accredited provider). If HMRC suspects an umbrella is operating unethically, they will issue it with a Scheme Reference Number (SRN).

For more advice regarding selecting an umbrella company, please read our blog: Finding An Umbrella Company In The New Year: 10 Tips For Contractors And Freelancers Seeking An Umbrella Company.

How do you transfer umbrella companies?

Moving from one umbrella to another isn’t as complex as you might think. Firstly, you need to let your current umbrella know you’re leaving and request a P45. You’ll also need to approach your new umbrella company to let them know your desire to register and go through the onboarding processes.

Don’t forget to update the supply chain too. If you change umbrella companies, you must keep your agency and end-client up to date – to ensure they send payments to the correct umbrella and avoid any delays. Some agencies (perhaps unfairly) will only allow temporary workers who find assignments via them to use specific umbrella companies that appear on the agency’s Preferred Supplier List (PSL). Make sure you know what the situation is with your agency before opting to transfer umbrella companies.

Compliant umbrella companies will have similar registration procedures because they all require the same information to process your payroll legally. You will need to provide plenty of personal information, including your address, date of birth, National Insurance number, assignment details, banking information, and more. Once you have done this, you will be required to review the umbrella’s Employment Contract and sign and return it when you’re happy.

It is that simple! We strongly advise you to transfer away from your umbrella company if you believe they’re providing a substandard service or if you have any doubts about their compliance with HMRC’s rules and regulations.

A recommendation – only use an FCSA or Professional Passport accredited umbrella company

The umbrella company marketplace is currently unregulated. Multiple stakeholder groups are campaigning for the government to intervene and provide stricter rules to ensure temporary workers are protected from non-compliant payroll providers – and who can blame them! While regulations are expected to be introduced in the future, the timeframe is unclear. Therefore, we recommend that you only consider using an umbrella company accredited by either the Freelancer and Contractor Services Association (FCSA) or Professional Passport – but who are they?

The FCSA and Professional Passport are two regularly bodies that self-regulate the contractor payroll sector. For an umbrella to obtain accreditation from either of these bodies, they must prove they operate compliantly with UK tax laws and have their employees’ best interests at heart. To gain membership, umbrellas will go through a strict series of audits and assessments and only when they have successfully proven every one of their processes is compliant will they officially earn the accreditation. And, it doesn’t stop there. Companies must undergo annual reviews to ensure they continue to operate compliantly and ethically. Therefore, if you’re looking for a compliant umbrella company, we recommend you only consider using one with an FCSA or Professional Passport accreditation.

Please look at our FCSA and Professional Passport umbrella company comparison tableavailable here. You can see which umbrella companies are accredited by the FCSA and Professional Passport, and it’s been recently updated. We also have an umbrella company directory that you may find helpful.

Top 10 umbrella companies

Are you currently searching for a reliable umbrella company you can trust? Perhaps you’re currently using an umbrella but are not receiving a high-quality service? To help make your life easier, we’ve collated a list of our top 10 umbrella companies, and they’re well worth checking out. Every umbrella in our top 10 is accredited by either the FCSA or Professional Passport. And, some have special offers at the moment!

The Complete Umbrella Company Guide - Download Now

Click here to see our top 10 umbrella companies!

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