Choosing the right Umbrella Company

There are many Umbrella Companies operating in the UK, and deciding which one is best for you can be very confusing. We have detailed here a few things to look for in choosing the Umbrella Company that’s right for you.

Fees - All Umbrella Companies charge fees to cover their administration costs and of course they need to make a profit out of providing the service. Fees will vary between different Umbrella Companies, but generally will be either fixed weekly / monthly charges or a percentage of the gross invoice value. You should make sure that the fee you are quoted is the gross fee and not after higher rate tax relief, as this may not reflect your personal circumstances. Are there any hidden charges? i.e. joining or leaving fees or expenses processing fees and are you charged while you are not working?

Peace of Mind - You want to have the peace of mind that your Umbrella Company is going to stay in business and that you are going to be paid. Asking how long they have been operating and how many Contractors they have on their books can give you an indication on how safe an option they are. Search the internet for any articles that may indicate financial problems or negative press and use the Companies House web-check service http://www.companieshouse.gov.uk/ to ensure that they are up to date with the company filing requirements. As with all businesses there is always a risk that an Umbrella Company will fail but following the steps above should give you a better idea on how sound a company they are.

Expenses and Dispensations - One of the main benefits of working through an Umbrella Company is the ability to claim expenses and offset these against your tax liability. The rules on expenses are the same for all Umbrella Companies, so be wary of any Umbrella Company who states that they have a dispensation that allows you to claim a large amount of un-receipted expenses. In reality a dispensation just means the Umbrella Company does not have to report on expenses to HMRC, so reducing their administration burden. You can only ever claim for expenses that you have actually incurred, wholly, exclusively and necessarily in the course of providing your services.

Payment - Umbrella Companies raise invoices for your services to your agency or client, based on the timesheets that you complete. You should be sure that you know how long it will take before you receive the payment for a timesheet in your bank account. As most Umbrella Companies will only pay you once they have received cleared funds into their account, there can be delays in receiving your money due to the bank clearing system. A number of Umbrella Companies operate a faster payment system which means that you will receive cleared funds into your account faster. An Umbrella Company may offer to pay you through the CHAPS system so that you receive cleared funds into your account quicker, make sure that you know if there is a charge for this and how much it is.

Insurance - Most contracts dictate that you must be covered by a certain amount of insurance; you should ensure that the Umbrella Company you choose provides an appropriate level of insurance that fulfils these contractual requirements. Because the Umbrella Company will employ you they are required by law to provide Employers Liability Insurance, they should also provide both Public Liability and Professional Indemnity cover. You should ensure that the cover they hold does not exclude your profession and also make sure that you know if they charge you for providing this insurance, as this could increase the cost of their service.

Preferred Suppliers - Many Recruitment Agencies have ‘Preferred Supplier’ lists of Umbrella Companies, these lists are quite often selected from the Agencies perspective not that they will offer you value for money. Always select your Umbrella Company objectively based on your requirements not just because they are on an Agencies list.

Pensions - Some Umbrella Companies provide access to a Company Pension scheme, this can be a good option as there are significant tax breaks for contributions into a pension.

Recommendations - As with all business decisions a recommendation from a trusted friend or colleague is a good way to start on your search for the right Umbrella Company for you. But don’t worry if you get it wrong, there are plenty to choose from so you can always move to a different one if you are not happy with the service.

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