What Makes a Good Umbrella Company?

Top tips on finding the best Umbrella Company

How does an Umbrella Company work?

Before you start comparing umbrella companies, you will first need to know how they work.

An umbrella company becomes the employer of the contractor. This is opposed to self-employed contractors who operate through their own limited companies or as sole traders.

As an employee of the umbrella company, the contractor is put on the company's payroll. This means that the umbrella company, not the contractor, collects the fee from the client. Once the fee has been collected, it is processed through the PAYE tax system, meaning the correct tax and National Insurance levels are deducted before the contractor is paid.

This is in contrast to limited company contractors who must organise their own tax affairs, paying tax after they have been paid their fee through self-assessment.

This is widely considered a great benefit to operating through an umbrella company as it means that contractors don't have to deal with tricky and time-consuming tax affairs as this is all sorted for them by the umbrella company.

The contractor will input their timesheet to the umbrella company who sorts out the rest.

The umbrella company invoices the client for the correct number of hours, sorts out payments, processes the contractor's expenses, takes care of the necessary admin and paperwork, organises insurance for the contractor and gives them statutory rights including sick pay, holiday pay, a workplace pension and maternity and paternity leave.

These are all tasks that limited company contractors have to take care of themselves. What’s more, as self-employed contractors, they do not receive statutory payments, which is considered a major drawback of this route.

That’s why umbrella companies have become increasingly popular for contractors in recent years, making contracting easy and hassle-free.

If you have decided to go umbrella, like the thousands of other contractors out there, you will need to know what makes a good umbrella company. Next, we will look at how to identify the best umbrella company for you.

What are the Umbrella Company costs?

One key factor to look at when finding a good umbrella company is cost.

For the services offered to the contractor, umbrella companies charge a fee. Although umbrella company fees remain competitive, they do vary from company to company and will depend on the level of services and the number of benefits that the contractor requires.

As a minimum, contractors can expect to pay around £15 per week to the umbrella company, however, this figure will increase depending on how many services you will use.

It is also important to look out for how the umbrella company charges its fees as this can impact how much you end up paying.

Umbrella companies can charge their fees either as flat-rate fees or percentage fees. A flat-rate fee is a fixed fee, whereas a percentage fee is one that is taken as a percentage of the contractor’s earnings. With the latter option, if the contractor earns more, they will pay more to the umbrella company, even though the company is not doing more work for the contractor.

That's why we would suggest that contractors opt for a company that offers flat-rate fees to ensure you get a fair deal.

Do they have a good reputation?

Another way to detect a good umbrella company is to opt for one that has great reviews and a solid reputation. After all, if lots of other contractors have had a good experience using the umbrella company, then chances are you will too.

Thankfully, it is easy to find an umbrella company with a good reputation. Contractors can opt for a simple google search to see reviews that other contractors have left on the web. Contractors can also use Umbrella Supermarket's contractor calculator as we only ever work with the best umbrella companies we know we can trust.

When you compare umbrella company’s using our umbrella company calculator, you can therefore rest assured that you will be picking a company with a great reputation.

Do they offer the services you require?

Although every umbrella company will offer the essential services needed by contractors, some contractors will need additional benefits.

Whether you need advice on pension contributions, require same-day payments, help with things like childcare tax credits, or need additional levels of insurance, you will need to ensure that the umbrella company you choose offers the services you need.

Is the company HMRC compliant?

Although the vast majority of umbrella companies are HMRC compliant, just as in any industry, there is a handful that aren't. Therefore, it's important to check that the provider you choose is HMRC compliant to avoid getting caught out.

Some warning signs for companies that aren’t HMRC compliant include:

  • Companies that process only part of the contractor’s salary through the payroll to limit the amount of tax paid by the contractor. This is classified as tax avoidance.
  • Companies claiming that contractors can keep up to 85% of their wages whilst remaining tax compliant. Again, this isn't true and would be classified as tax avoidance as income tax is set at a rate of 20% and National Insurance is also deducted from earnings.
  • Those that pay the contractor through loans, credit or investment payments.
  • Those that route payments through other companies.

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Now you know what makes a good umbrella company, contractors can find the perfect provider with our handy and easy-to-use contractor calculator.

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Decision Making

Is PAYE Better Than Umbrella?

If you are considering contracting you will need to decide on PAYE or umbrella.

It can be a difficult decision to make and contractors will inevitably be questioning which option will be the best for them.

To help every contractor get on the right track for them, in this guide Umbrella Supermarket looks at PAYE vs umbrella, outlining the key differences and how this will impact you.

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Why Should Contractors use an Umbrella Company?

There are many reasons that contractors across the UK opt to work under an umbrella company.

Umbrella companies offer an easy way to contract and remove the need for the contractors to worry about the burdens of admin, finances, tax and IR35, all things that limited company contractors have to deal with.

For this reason, many contractors will be weighing up their options and questioning whether it is worth using an umbrella company in 2021. To help make the decision that little bit easier, Umbrella Supermarket has put together this guide on the pros and cons of using an umbrella company.


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Does an Umbrella Company Charge Fees?

Any contractor that is considering operating through an umbrella company in 2021 will need to understand Umbrella Company fees - from why an umbrella company charges fees, how they are paid to how much the contractor will pay.

In this guide, Umbrella Supermarket answers those all-important questions to help every contractor know exactly where they stand when it comes to umbrella company fees.


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Guide to Umbrella Company Pensions

One of the many advantages to operating through an umbrella company for contractors is that they become an employee of their chosen provider.

In turn, this means that the contractor will be automatically enrolled onto the umbrella company’s workplace pension scheme.

To help contractors find out more about umbrella company pensions Umbrella Supermarket has put together this handy guide.


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Beginner’s Guide to Using an Umbrella Company

If you are considering contracting through an umbrella company you will naturally have questions and queries over how they work.

After all, making the move to umbrella can be a big step for contractors. To help, in this guide Umbrella Supermarket explains how to get started with an umbrella company and share our top tips for using one in 2021.


PAYE and Umbrella

Guide to PAYE vs. Umbrella

PAYE or umbrella is a question asked by every contractor. Which one you opt for will have a big impact on your contracting career and lifestyle. So, it's important to make the right decision for you.

To help makes things a little bit easier, Umbrella Supermarket has put together this guide on PAYE or umbrella, outlining the key differences between each, to help you make the best and most informed decision for you.

Holiday Pay for Umbrella Contractors

Complete Guide to Holiday Pay for Umbrella Contractors

One of the many benefits to working through an umbrella company is that you will receive holiday pay as well as a range of other statutory benefits including sick pay, maternity and paternity pay.

To find out more about umbrella company holiday pay, and how to calculate how much you will be entitled to, Umbrella Supermarket has put together this handy guide.

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When Shouldn’t You Use an Umbrella Company?

Contractors must make several decisions throughout their contracting careers. One big decision contractors have to make is how they will operate.

One way that contractors can work is through an umbrella company.

Umbrella companies have become an increasingly popular way to contract in the past few years, offering many benefits to the contractor. But, how do you know whether this option is right for you?

To help every contractor make the right decision for them, in this guide, Umbrella Supermarket explains when not to use an umbrella company.


The truth about HMRC approved Umbrella Companies

There are tons of benefits to using an umbrella company, which is why they have become such a popular option for contractors in recent years.

After all, an umbrella company takes away the stress and hassle of operating through a limited company whilst offering contractors a range of advantages, such as statutory rights, paying them a salary, deducting correct tax levels and National Insurance, and taking care of tasks like expense processing and invoicing.

However, as more and more contractors opt to use the services of an umbrella company, more providers have started to claim that they are HMRC approved.

To bust the myths around HMRC approved umbrella companies and get straight to the facts, in today's guide Umbrella Supermarket look at whether HMRC approved umbrella companies really exist, so you know exactly where you stand.

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How Much are Umbrella Company Costs?

If you're considering making the leap to contracting, you will understandably want to know how much you will have to pay in umbrella company costs. After all, this amount comes directly out of the contractor’s pocket, so it’s important to be clued up on how much you should expect to pay.

To help contractors, in this guide Umbrella Supermarket answer the all-important question of how umbrella companies cost in 2021.


Choose Between PAYE or Umbrella

How to Choose Between PAYE or Umbrella

Every contractor faces the decision between PAYE or umbrella, but how do you know which is the best option for you?

After all, PAYE and umbrella both have key differences, meaning contractors should do their research to find the best path for them.

Thankfully, Umbrella Supermarket is here to help. In this guide, we take a look at PAYE vs. umbrella, explaining what you should know before making the all-important decision.