How to Compare Umbrella Company Fees

Complete Guide to Comparing Umbrella Company Fees

Why do umbrella companies charge fees?

Let’s start by looking at why umbrella companies charge fees.

An umbrella company will employ the contractor and offer them a range of benefits. These include statutory benefits such as sick pay, holiday leave, a workplace pension and paternity or maternity leave. The umbrella company will also take care of tasks such as invoicing the client, chasing payments, plus any admin or paperwork that is required.

Finally, the umbrella company will also provide the contractor with a basic level of insurance required to carry out the contract at hand. This usually covers professional indemnity insurance, public liability insurance and employer liability insurance as a minimum.

Many umbrella companies will also offer additional benefits and services to the contractor for an increased fee. This is important to consider when comparing umbrella company fees as those with low fees might only offer basic services but you might require more from a company.

Additional perks can include:

In return for these benefits, the contractor will pay the company a fee.

The great news is that HMRC considers umbrella company fees as a legitimate expense, meaning you will not pay tax on them.

To help you compare umbrella company fees, we will next outline how umbrella companies charge their fees, how much you should expect to pay and any extras to look out for, to help you find the best deal.

How do umbrella companies charge their fees?

Umbrella companies can charge their fees in one of two ways, these include:

  • Percentage fees: here, the umbrella company will charge their fee as a percentage of your revenue. So, the more you earn, the more you will pay in fees. Often, the percentage fee will be capped meaning you wouldn’t pay over an agreed amount. This is often the least favourable method of paying fees as you will end up paying more in fees if you begin to earn more, but the umbrella company will continue to do the same level of work.
  • Fixed fees: the other way of charging fees is as fixed fees. This is a set sum of money that the contractor pays the company and remains the same regardless of how much the contractor earns. For this reason, this is often seen as the best option.

Another factor to account for when comparing umbrella company fees is whether they are charged as net or gross fees.

  • Gross fees: here, the contractor will be charged their fee before tax relief has been applied
  • Net fees: on the other hand, with net fees the contractor will be charged the fee after tax relief has been applied

When comparing umbrella company fees, it is always important to look out for how they charge their fees as this can make a big difference on how much you will end up paying.

Are there any other costs to account for?

Contractors should also look out for added costs umbrella companies can charge when looking at comparing fees. After all, these can have a direct impact on how much you take home.

Some common extra costs to look out for include:

  • Sign-up fees: some umbrella companies will charge a one-off joining fee. Although this won’t have an impact on your take home pay each month, it is worth considering and comparing between companies
  • Exit fees: likewise, some umbrella companies will also charge a one-off exit fee. Again, it is worth looking out for this
  • Charges for added benefits: as we have already mentioned, some umbrella companies will charge extra for added benefits so it is always important to look out for this as it can have a big impact on how much you end up paying.

Always make sure you read through the small print to understand exactly what the umbrella company fee covers and whether you will end up paying more for additional costs. After all, some umbrella companies will advertise a low fee but will charge extra for certain services which can add up.

Use an umbrella calculator to compare umbrella fees and more

Now you know what to look out for when it comes to umbrella company fees and what aspects you should be comparing, Umbrella Supermarket’s umbrella calculator can help make the next steps easy.

Simply input a few key details into our handy tool, such as your contractor preferences and day rate, and we will generate a list of the best suited umbrella companies for your needs. What’s more, we will clearly list each umbrella company’s fees.

Presented in an easy to view list form, you will be able to see exactly what fees each company is charging and what services and benefits you will receive in return. What’s more, you can always edit your information to see how this will impact your results and how much you will pay in fees.

Our umbrella company calculator makes it quick and easy for contractors to compare umbrella fees, to help you find the best deal.  Why not see what we can do for you in 2021?

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