If you are considering joining an umbrella company, we explain why should establish the true weekly / monthly fee (margin) of each service provider on your shortlist before signing up.
Here, we look at what some well-known umbrella companies charge, and explain why you a) need to find out what the true costs are, and b) consider other factors alongside price when choosing a PAYE scheme.
Umbrella fee should be the only difference between quotes
By definition, PAYE umbrella companies must process their employees’ pay according to fixed HMRC rules. This means that the same amount of income tax and National Insurance Contributions should be deducted from your gross pay, regardless of which scheme you work under.
In fact, the only way legitimate umbrella firms can compete with each other price-wise is via the margins (i.e. fees) charged to their clients.
A few firms charge a fixed percentage of the invoice value, but this is increasingly rare. The vast majority will charge a weekly or monthly fee for processing your timesheets (and the associated admin work).
Weekly / Monthly Cost Comparison Table
Some umbrella companies don’t publish their margins online, however many still do. We’ve listed a select few below. Our partner firms are highlighted in orange:
|Umbrella Company UK||£12/week (limited time)||Special offer for ITC visitors. Find out more. Same Day Payments. £25m Insurance. No tie-ins.|
|Clarity Umbrella||£25||£95||No entry/exit fees, fast set-up, same-day payments.|
|Gabem Umbrella||£22||N/A||Same day payments, full insurance cover|
|SG Umbrella||£25||£89||FCSA Registered, pay as much as you want into your preferred pension, switch between limited/umbrella with ease.|
|Simplify||£22.50||£80||Same day payments|
Prices quoted during March 2020. Please email us to add a firm/add information to existing entries.
Net and Gross Fees
Some firms will also quote their net fees, rather than gross fees, which can make it hard to compare costs.
The net fee is how much it will cost you – in the pocket – after tax relief has been applied, either at the basic rate (20%), the higher rate (40%), or additional rate (45%).
So, make sure you are comparing gross fees, rather than net fees.
Hidden / extra costs
Before signing up, make sure you know if you’ll be charged extra fees for any of the following:
- A signing up / joining fee.
- Fees/charges for exiting the scheme.
- A charge for insurance cover – typically this is for a blanket policy to cover all employees.
- Charges for same-day payments (if this isn’t already included in the fee).
- Charges for additional administration, such as processing expenses.
The problem with net take-home pay calculators
Online calculators can often be misleading, as they typically include assumptions about expenses claims, etc. which may not apply to you, and calculate a higher net take-home pay than would be the case in reality.
Holiday pay is typically not shown in such calculations, although this is deducted by the umbrella company and held on behalf of its clients. Holiday pay is either paid regularly, or remains in a ‘pot’ until you draw upon it, or an assignment comes to an end.
To work out how much holiday pay an employee is entitled to, your umbrella company will multiply your gross taxable pay by 12.07% – you can read more about calculating holiday pay here.
You should also be aware of Pensions Auto Enrolment. All contractors should be automatically enrolled in the umbrella company’s umbrella scheme by the third pay-packet and can only opt out once the first payment has been made. If you wish to opt out at this stage, your contributions will be refunded.
However, deductions for pensions contributions don’t show in most online calculators, as it would be impossible to make an amended take home pay figure, as the contributions would vary between employees.
- From our experience, price is merely one important factor to consider when comparing umbrella companies. After all, wouldn’t you rather pay a bit more for a reliable, trustworthy provider than save a few pounds and receive poor service?
- For more background, and things to look out for, try our concise guide to umbrella companies.
Do you need an umbrella company now?
If you’re looking to join an umbrella provider, simply visit our umbrella company directory.