If you have decided to go down the umbrella company route, there are dozens of providers out there. Here we look at some important things to consider when you are choosing a prospective provider.
Only consider legitimate PAYE umbrella companies
Before you start, it is important to know that the only ways PAYE umbrella firms can compete with each other is on price (the weekly or monthly fee they charge to contractors), and customer service.
And importantly, whatever marketing claims you may read, they can all only reclaim the cost of legitimately incurred expenses (directly via the umbrella for things such as mileage claims, or via you annual self-assessment tax return).
Other non-PAYE umbrella-type schemes may promise you massive returns on your contracting income (‘85% net take home pay’) and so on, but joining one of these schemes could open you up to a future HMRC investigation, penalties and considerable backdated taxes, so we always suggest contractors to stick to only reputable PAYE umbrella schemes.
How to find the best umbrella provider for you
Here are some of the main questions you should bear in mind when comparing umbrella companies:
1. What is the umbrella company margin (make sure you compare like-with-like, i.e. what is the gross fee per week or month). Often umbrella companies illustrate their fees on a post-tax basis, which may be misleading. Beware of companies who charge a percentage of the invoice value, as you could find yourself significantly out of pocket! Find our more in our guide to umbrella company fees and charges.
2. Find out as much background as you can about the firm; when was it established, it is a member of any industry bodies, how many contractors does it have on its books, etc.
3. What sort of technology does each firm use to handle payments and timesheets. Ideally you would have access to an intuitive online accounting system so that you can look up the status of your timesheet submissions and expenses claims in realtime.
4. Are there any extra fees involves, such as joining or leaving fees?
5. What has the umbrella scheme done to comply with the Agency Workers Regulations, which provide extra rights for temporary workers following 12 weeks on assignment. There are various models in place to ensure that companies comply with the AWR, such as the ‘Swedish Derogation’ model.
6. Will you have a named account manager to deal with? This is always preferable.
7. How are payments processed, and what is the payment schedule? Does the umbrella charge for same-day transfers? Historically, some schemes have charged extra for payment via CHAPS, however the advent of FP (Faster Payments) means that most major banks can make and receive payments on the same day, for no extra cost.
8. Some umbrella companies have given the industry a bad name in past years – often encouraging contractors to claim illegitimate expenses (which reduce their income tax liability). Ask any prospective firms for details of any professional compliance audits they have undertaken to prove that they operate legitimately.
9. Does the umbrella fee include business insurance cover? (many clients insist that contractors hold professional indemnity insurance cover as a minimum). If so, make sure that your specific work and skills are covered by any blanket policies.
10. Does the provider offer any other ‘perks’ or incentives to its employees, such as pension provision, free vouchers, or referral commissions if you recommend a colleague?
Do you need a PAYE umbrella company?
If you’re looking to join an umbrella company scheme, simply fill in this form, and our recommended partners, Churchill Knight Umbrella, will get right back to you to answer any questions, and to give you a take-home pay illustration.
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