How to compare umbrella companies: guide for contractors

Everything you need to know when choosing an Umbrella Company

Using an umbrella company is a popular option for thousands of contractors. In exchange for a fee, an umbrella company puts a contractor on their payroll, takes care of their tax and National Insurance payments as well as offering a range of statutory rights.

Often considered the easiest way to contract, more and more contractors are taking this route. As a result, thousands of umbrella companies have popped up to offer their services.

Although this means plenty of choice, it can also make it difficult and confusing for contractors to know which umbrella company to choose. After all, not all umbrella companies are the same – from fees to benefits, every company is different.

With every umbrella company under the sun claiming to be top dog, contractors need to know how to compare organisations to find the best umbrella company for them.

To help make the process easier, Umbrella Supermarket have compiled this handy guide to everything contractors need to know about comparing umbrella companies to find the best one for their needs.

Fees

In exchange for their services, every umbrella company charges a contractor fees. Fees are usually taken off a contractors’ take home pay before it’s transferred to them.

However, fees differ from company to company, so it’s crucial to consider everything from how much they charge to the way they charge it.

Umbrella company fees can either be:

  • Fixed fee: this is a set amount, usually taken weekly or monthly.
  • Percentage fee: this is when the company takes a cut of the contractors’ pay. Under this option, when your pay increases, so will the umbrella company’s fee.

Many contractors prefer for the former option. After all, many don’t want to have to pay more for the same services merely because their own pay has increased.

Other things to look for when it comes to umbrella fees is how often fees are taken – that can be weekly, monthly or occasionally less often, allowing you to choose an option that best fits with your own lifestyle.

It’s worth also looking out for any extra fees that companies can sometimes charge, including:

  • Joining fees
  • Exit fees
  • Fees for processing expenses

Again, these may impact your decision depending on how much the company charges.

Payment terms

When it comes to finding the best umbrella company for you, there are important questions to consider around payment terms - from how often you will be paid to how easy it is to be paid. Again, every company differs when it comes to payment terms meaning it’s important for contractors to compare in order to find the best fit for them.

When it comes to payments, contractors should look out for a few key factors:

  • How often will you be paid? This could be every week, fortnight or month.
  • Is it easy to get paid? Every contractor knows the importance of getting paid on time. Avoid companies that make you jump through loopholes to submit timesheets and look out for any signs that payments may be delayed, such as requirements for timesheets to be signed off.
  • Red flags: avoid umbrella companies claiming that they can offer more tax efficient ways of working. After all, this will actually harm you in the long-run as it is you that is liable for your own tax responsibilities. Look out for companies that split your salary into 2 or more payments, with just one payment going through the PAYE system, pay via a capital advance agreement or make payments through an offshore structure.
  • Pension contributions As your employer, an umbrella company is legally obliged to enrol you onto a pension scheme if you meet the following criteria:
    • Are between age 22 and the state pension age
    • Work in the UK
    • Earn more than £10,000

     

    Look into the umbrella company’s pension arrangements to find those that meet your personal requirements the best. After all, some companies offer better terms than others.

  • InsuranceAs an umbrella company acts as an employer, they are legally required to have employers’ liability insurance to protect you should you fall ill or are injured at work.Although not a legal requirement, you should also expect the umbrella company to offer public liability and professional indemnity insurance considering that these are typically included in contractor’s contracts.
  • It’s worth considering that if a company doesn’t offer these types of insurance, you will have to bear the extra costs of purchasing them yourself.Umbrella companies can also offer other insurance types, from personal accident insurance to cyber insurance, which is worth considering if these add value to you.

Reputation

Clearly, if an umbrella company has a bad reputation, you don’t want to work with them. When it comes to finding the best umbrella company, contractors should take the time to research their history, reviews and credentials.

A personal recommendation is a big thumbs up, however, looking at online reviews is also a great way to gain an insight into the company’s reputation.

By carrying out a simple online search, contractors can also find other important credentials such as how long the company have been operating, how many contractors they work with, if they have experience of working with contractors in your sector and whether they have any additional accreditations that instil trust.

A great indicator of whether you can trust the company is by checking whether they are registered with the Freelancer and Contractor Services Association. If an umbrella company is registered with the FCSA it means that their operations, policies and processes meet strict standards.

Expenses

In recent years, HMRC has tightened the rules on what expenses contractors can claim through an umbrella company. Umbrella contractors are only able to claim limited expenses, like mileage or accommodation, only if they occur whilst on the job.

Therefore, contractors should look out for and be wary of umbrella companies that claim they can save on tax by filing for a wide range of expenses as this is not the case.

Find the best umbrella company for your needs with the help of Umbrella Supermarket

When it comes to finding the best umbrella company for your needs, every contractor should make use of umbrella comparison tools to help them weigh up their best options. After all, 76% of people have saved money by using an umbrella comparison site prior to picking one to use.

Using Umbrella Supermarket’s award winning comparison tool, contractors can generate the best umbrella companies for their needs in just 2 minutes. No hassle, no phone backs.

 

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