When should you consider leaving an umbrella company?

When should you consider leaving an umbrella company?

Are you currently using the services of an umbrella company that over-promised and is under-delivering? While some excellent umbrellas are out there, some could benefit from an overhaul in customer service. Our latest blog will help you decide when you should consider leaving an umbrella company. We hope you find it helpful!

Late payments

An umbrella company’s primary responsibility is to pay its employees correctly and on time. In some cases, late payments are not always the fault of the umbrella company because they may not have received funds from the agency or end-client. However, some umbrella companies may be hectic and understaffed. You should consider leaving an umbrella company if you suspect your payments are late and it’s their fault.

Poor customer service and communication

When you join an umbrella company, you become an employee, and the umbrella is the employer. Therefore, it’s natural you would expect to receive good service and communication. If for whatever reason, you don’t feel you’re getting the customer service you deserve, you should consider looking for an alternative PAYE umbrella company.

Potential tax avoidance scheme

Umbrella companies will process your pay following HMRC’s tax system Pay As You Earn (PAYE). This means you’ll receive your net salary after tax and National Insurance deductions have been sent to HMRC by the umbrella company on your behalf. Typically, umbrella contractors should expect to retain roughly 55% – 70%.

If you find an umbrella offering you substantially higher pay retention (sometimes as high as 90%) – alarm bells should be ringing. Avoid them like the plague – they’re almost certainly a tax avoidance scheme, and engaging with them could land you in serious trouble with HMRC. Trust us – it’s not worth the risk.

Misleading umbrella company calculations

While most umbrella companies will give you an accurate take-home pay projection before joining, some have been known to manipulate the figures to encourage you to join them. Some umbrella companies can promote higher earning potential by changing the tax code, hours worked, and other elements. In reality, all umbrella companies are legally required to process your payroll in the same way. The only thing that should vary between compliant umbrellas is the margin they deduct.

Some umbrella companies also include an expenses allowance in their take home pay calculations. This is sneaky because in 99% of cases, you won’t be eligible to claim tax relief on expenses with an umbrella company because of Supervision, Direction and Control (2016).

You should consider leaving an umbrella company if they pay you significantly less than they stated in a take-home pay calculation. The chances are they deliberately tricked you. Do you want to stick with a deceitful umbrella company?

Outside IR35 opportunities

The best way to maximise your pay as a UK contractor is to work through a personal service company (PSC) on assignments outside IR35. This is because you can pay yourself with a combination of salary and dividends – the most tax-efficient way to operate.

You may use an umbrella company at some point for assignments inside IR35. However, if you can land a role that’s outside IR35 and allows you to use a PSC, you should consider leaving an umbrella company and changing the way you’re paid.

Lack of accreditation

With over 500 umbrella companies in the UK to choose from, you must select an umbrella company that has a well-respected accreditation from a professional body.

The FCSA (Freelancer and Contractor Services Association) and Professional Passport are the two most recognised professional bodies in the UK committed to ensuring the supply chain of temporary workers is compliant and ethical. We strongly recommend you only consider using an FCSA or Professional Passport accredited umbrella company. Why? Because to obtain one of these accreditations, umbrella companies must undergo a series of assessments and audits to prove they operate compliantly with HMRC’s rules and regulations. There are also ongoing audits that umbrella companies must pass to maintain the accreditation.

Switching umbrella companies is easy

If you’re considering leaving an umbrella company but are concerned about the administration involved with switching – don’t be. Switching umbrella companies is easy. All you need to do is alert your current umbrella that you’re leaving and request a P45 document.

Once you have chosen a new umbrella company to join, contact them to register. This shouldn’t take longer than 5 to 10 minutes. Never stick around using the services of an umbrella if you’re unhappy with them – it’s not worth it, and switching is straightforward!

You may be interested in joining a provider with a lower weekly umbrella company margin – and who can blame you? Just make sure the new company you join is compliant with UK tax law.

Top 10 umbrella companies

Hopefully, the above has helped you understand whether you should consider leaving an umbrella company. If you’re looking for a reliable and compliant umbrella company you can trust – you’ve come to the right place. We have created a list of top 10 umbrella companies, and some of them have special offers at the moment! Please check them out now.

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Click here to see our top 10 umbrella companies!

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