10 questions to ask umbrella companies

10 questions to ask umbrella companies

If you are considering signing up to an umbrella company, it’s important to choose the right one.

There are various non-PAYE umbrella style schemes out there that often claim to be able to make you big savings, such as promising “85% net take-home pay”. These schemes may sound attractive but could leave you open to investigation by HMRC further down the line, which could result in fines, back taxes and interest.

It’s recommended that you only go with a legitimate PAYE umbrella company. It’s also worth noting that despite some marketing claims to the contrary, these companies can only claim the same legitimate expenses – either directly through themselves for allowable expenses, such as mileage, or later via your annual self-assessment tax return.

In fact, the only differences that umbrella companies can offer is in their level of customer service and the fees that they charge.

Here are ten questions to ask that should help you sift through the choices on offer:

1. What do they charge?

Make sure that you compare like for like – i.e. the gross fixed fee per week or month. Some companies will show headline post-tax fees, which can be misleading. You should also be wary of percentage-based fees, especially if your contract role is relatively high earning.

2. Are there any additional fees?

These could include things such as leaving or joining fees.

3. What is the firm’s background?

Is it long-established with a large body of contractors signed up? In other words, does it seem professional and legitimate?

4. What software and platforms does it use?

It can be useful if you can easily access an online account to view details such as your timesheet and expenses.

5. Has it taken steps to comply with the Agency Workers Regulations?

These regulations ensure extra rights for temporary workers after they have worked for 12 weeks concurrently. There are various models aimed at ensuring that companies comply with these rules.

6. Will you be assigned a named account manager?

The personal touch is always preferable if you do have any issues to deal with.

7. What is the payment procedure?

What is the payment schedule, and does the company charge extra for same-day money transfers? At one time, companies would have used CHAPS for this and may have charged extra. Since the introduction of FP (Faster Payments), however, most major banks can process payments on the same day at no extra cost. If your umbrella company charges extra for the same service, you might want to ask why.

8. Does the umbrella company’s fee include insurance?

End clients will often insist that contractors have relevant cover such as professional indemnity insurance. This might be included, but make sure that your specific situation is covered by any “blanket” policy.

9. Can they provide professional compliance audits?

This can help show that the company operates legitimately and does not, for example, encourage contractors to submit illegitimate expenses.

10. Are there any perks or incentives?

These could include things such as pension provisions, vouchers or a referral reward scheme if you recommend the company’s service to a colleague.

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