How to Choose the Best Umbrella Company in the UK

Umbrella companies vary in their fees, terms and other perks. Find out what to consider when comparing umbrella companies to find the best for you.

For freelancers looking to simplify the process of tax submission and obtain the same benefits as those working in full-time employment, searching out an umbrella company could pose the most attractive way forward. While there is a plethora of options to choose from, each claim to be the best umbrella company in the UK, making it hard to know where to turn.

Unlike other guides on the subject, Umbrella Supermarket have no agenda and won’t try to push you towards using one company over another. Instead, our objective is to first of all ensure that an umbrella company is indeed the right option for your circumstances, then make the process of choosing a suitable one as easy, efficient and hassle-free as possible.

Sole trader, limited company or umbrella company?

Self-employed people in the UK who prefer to work for themselves have three main options when it comes to complying with British tax and employment laws. These are:

Sole trader

This option is working for yourself in the truest sense of the phrase and means your earnings will only be subject to PAYE income tax and national insurance. However, it does not offer any statutory benefits (such as maternity or paternity leave, sick pay or holiday pay) and also entails a substantial amount of administration on your behalf. Tax returns must be submitted annually, quarterly or even monthly depending on your circumstances.

Limited company

Setting up shop as a limited company allows you to separate yourself from your business completely, meaning there is reduced liability attached to your own personal assets if things should go wrong. Moreover, switching from a sole trader to the director of a limited company allows you to pay yourself a salary and additional dividends annually, which incur a lower tax rate and could help you to save money. It does involve increased admin, however.

Umbrella company

By choosing to work through an umbrella company, you’ll become an employee of that firm and will receive the full statutory benefits outlined above, as well as having all of your invoicing and tax returns taken care. However, you will be required to pay the umbrella company a weekly or monthly fee in exchange for the benefits they provide in comparison to limited companies and sole traders.

Making a decision

Bearing in mind those three options, it’s well worth taking the time to investigate which particular one will be most beneficial to you and your business. If you decide that the practicality and peace of mind offered by an umbrella company is well worth the extra expense, it’s now time to locate the best umbrella company for your needs.

Compare and contrast

Your first port of call when searching out the best umbrella company to take care of your business should be an umbrella comparison site, which can allow you to see at a glance the various terms, services and perks provided by each one. In fact, 76% of people have saved money by using an umbrella comparison site prior to picking one to help them. Some of the things you might want to keep an eye out for include:

Service fees

Does the umbrella company charge a flat-rate fee for their services, or will their rate increase in line with your own earnings? The former is generally preferable to the latter, since it seems hardly fair to be charged a higher price for the same service just because you earn more.

Payment terms

It’s important to find out when and how often the umbrella company plans to pay you, whether that be monthly or weekly. Steer clear of any organisation only offering pay-when-paid terms. As an employee, you deserve to receive regular remuneration.

Pension schemes

Find out the terms of their pension schemes and whether it’s possible to opt in or out, as best befits your personal preferences and circumstances. Some may offer more favourable terms than others.

Insurance coverage

Certain contracting jobs require specific kinds of insurance, such as Employer's Liability, Professional Indemnity and Public Liability. It’s important to check whether you are required to obtain these by law and whether your chosen umbrella company provides them.

Online access

Many people like to be able to log in to their business account and monitor incoming payments and outgoing expenses remotely, so that they can keep tabs on their finances at all times. If this is important to you, check it’s provided by the company in question.

Human support

While the ease and automation of digital services can be hugely convenient, there are certainly times when you still want to get hold of a human being to answer your questions. Check whether your chosen company offer 24/7 phone support or simply an email address.

Dig a little deeper

After having narrowed down the list of possible contenders, it’s time to find out more about the potential winner before you sign on the dotted line. Here are a few tips on how to ensure you don’t get stung by a cowboy operation or a partner that isn’t right for your needs:

Trawl through their history

With a large amount of umbrella companies springing up in recent years, it’s a good idea to ensure you use an established and reputable firm. A thorough background check will include how long they’ve been trading and what their credit rating looks like. If the umbrella company should go bankrupt or out of business, your money will disappear with it.

Read the fine print on fees

Not all umbrella companies are immediately up-front and transparent about their fee structure. As well as learning if it’s fixed-rate or fluctuating, you should investigate whether services such as processing expenses and submitting tax returns are considered as part of the package or additional extras.

Joining and leaving

Some umbrella companies may stipulate that there are fees for signing up and penalties for leaving their payroll. Since you will effectively be becoming their employee, this is counter-intuitive and should be avoided. However, it is important you adhere to the terms and conditions of your employment for the duration of your contract, or you may risk losing out.

Read reviews

No one can tell you more accurately how an umbrella company is run than those who have already experienced its services first-hand. Read online reviews from genuine customers and form a picture of how reliable they are as a business partner.

Test them out

Finally, your own experiences and intuition can be the best guide when it comes to finding the best umbrella company for your business. Call them up and grill them on their credentials. The speediness and quality of their response will tell you all you need to know about their customer service protocols.

Compare the best umbrella companies

At Umbrella Supermarket, all the umbrella companies on our site are fully compliant and reputable, so you know you’re comparing the very best. Enter a few details on our comparison tool to compare quotes from the best umbrella companies today.

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