AR Tax Accountants

How to choose an umbrella company?

How to choose an umbrella company?

Unfortunately due to many large end clients banning limited company contractors, I have noticed more and more contractors asking for advice on how to choose an umbrella company.

Here is a short article on what I would personally consider.

(1) Make sure the umbrella that you will be using is compliant

e.g. they process your salary via PAYE rather than as a loan. One way to determine whether or not they are compliant is by asking them for an example/dummy payslip where you should be able to see employee NI and PAYE deductions. The umbrella should be able to explain how they calculated these deductions. Another mark of compliance is if the umbrella company is registered with the FCSA or Professional Passport.

(2) Call as many umbrella companies as possible and ask them for a take-home pay projection.

Compare each projection and see where they differ and why. Sometimes the umbrella companies that get their projections wrong are the ones that are trying to seduce you and entice you to use them with a fake take home pay figure. Generally speaking, you cannot claim expenses under umbrella (although there may be some exceptions for reimbursed expenses, genuine mobile workers, etc), so if the umbrella company is claiming expenses you really need to make sure that they are on the right side of the law.

(3) From 6 April 2020, recruiters should be quoting your rate excluding employer’s national insurance, pensions, umbrella margin, and ‘wrapped up’ holiday pay.

Consequently, be on the lookout for over-inflated fake enticing rates from some recruiters. See if the umbrella company is able to explain what your real rate is (this should be in the key information document from the agency) & what the umbrella company charges in an honest and understandable way. As before, speak to as many umbrella companies as possible in order to get a feel for which companies are bending the truth and which ones are honest and straightforward in their dealings with you.

(4) Check out the Google Reviews pages of the umbrella company.

Things to watch out for are fake reviews (these are normally a bunch of 5-star reviews from people who have only done 1 Google review in their entire lifetime and the bunch of 5-star reviews comes after a bad review). In addition, watch out for companies that have removed their Google reviews page as they may have done this due to the huge number of complaints. Some umbrellas provide a horrific “couldn’t care less” service, e.g. late payments, wrong tax codes, etc so get every detail in writing especially any service level agreements, complaints procedure, payment frequency (weekly/monthly), payment dates, etc. It is worth noting some umbrella will be nice to you to start off with (before you sign up) but then once you sign up their service may deteriorate.

(5) The Employment Agency Standards (EAS) Inspectorate is the Government authority responsible for the enforcement of certain agency worker rights.

You can raise a concern with them directly on 020 7215 5000 or through the Acas helpline on 0300 123 1100, Monday – Friday, 8am to 6pm.


(6) You may want to call the umbrella companies from a withheld number

Otherwise, some salespeople will be constantly hounding you in order to get their monthly commission.

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AR Tax Accountants

£59/month accountants for contractors, freelancers, consultants, interims and locums

The above information is just for guidance purposes only and is not a substitute for professional advice and consulting the legislation.

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