Finding the best umbrella company for you

Finding the best umbrella company for you

Many different umbrella companies exist, so finding the right one for you can be a confusing and overwhelming process. Personal recommendations can be useful, but if you are looking for an umbrella company while having little prior knowledge or experience, then you will need to compare their services carefully.

Here are some different factors that you should keep in mind when trying to decide on the company that best suits your needs.


1) Insurance Policies

Just like other employers, umbrella companies are legally obliged to have employer liability cover in place. This insurance type will cover you if you receive an injury or otherwise become unwell through work.

Public liability and professional indemnity cover are not legal requirements but may come with strong recommendation depending on the type of work that you do. The former is valuable if your work puts you in contact with the public, while professional indemnity can protect the company against claims of professional incompetence or negligence.


2) Holidays and sick pay

Umbrella companies have an obligation to pay statutory sick pay after you have been absent through injury or illness for four consecutive days.

When it comes to holidays, some companies will expect you to take statutory annual leave, while others have a model that pays an extra 12.07% to cover a contractor’s annual leave.

Summary: Check the company’s policies on leave.


3) Expenses

You should be very wary if an umbrella company claims to have “special expenses dispensation”, lets you claim expenses that are not normally allowable or processes expenses without receipts.

It is worth bearing in mind that HMRC introduced new legislation in 2016 which assumes that contractors working through an umbrella company are operating under direction, supervision or control, unless they can prove otherwise. This very much limits what you can claim as legitimate expenses.

Summary: Check how the company handles expenses.


4) Hidden or extra costs

Are the standard fees the only ones that you will have to pay? Some umbrella companies have hidden or added charges such as joining or leaving fees, admin fees or charges for same-day payments.

Summary: Double-check for extra fees and costs.


5) Irrelevant claims

Some umbrella companies market themselves with spurious or irrelevant claims about issues such as HMRC compliance and IR35. As you file tax as a contractor under normal PAYE arrangements, claims of “IR35 compliance” are meaningless. Similarly, “HMRC-approved” claims mean nothing beyond the fact that HMRC is allowing an umbrella company to simplify expense affairs.

Summary: Don’t let catchphrase claims sway you.


6) Payment terms

It is important to understand how and when an umbrella company will pay you. Some points to consider include:

  • How long will it take for payments to reach your account?
  • Will you receive your pay weekly or monthly?
  • Does the company offer same-day payments when needed?
  • Are BACS, CHAPS or Faster Payments transfers available?
  • Are funds ever withheld for contingency purposes?
  • Is there a process for dealing with queries and complaints?

Summary: Ask about payment arrangements.


7) Pension provision

If you have auto-enrolment with your umbrella company’s group pension scheme, then you can take advantage of many tax benefits that would not be possible under a personal pension scheme.

Summary: Investigate the company’s pension scheme.


8) Online facilities

These days, most people prefer the ease and convenience of online portals when it comes to turning in their timesheets, as well as having a point of contact with a company. Some contractors still prefer paper-based timesheets, but faxing and posting them can be a hassle.

As well as an online timesheet facility, you might appreciate resources such as online helpdesks or expense management services.

Summary: Find out the level of online services offered.


9) Customer service

You expect a reputable umbrella company to be efficient in its operations, but how does it deal with you as an individual, and does it have procedures in place to deal with any queries and complaints? In addition to its levels of customer service, you might want to consider other aspects of the business, such as how long it has been in service and how many contractors it works with.

Summary: Demand the best customer care.

As a contractor, you have a great deal to think about when it comes to choosing the right umbrella company. Your company can play an important role in your career, so it’s worth taking the time to research different options to find the best one.

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