So, you’ve decided to contract the services of an umbrella company! Excellent choice. By signing up to an umbrella company scheme, you’ll gain access to all of the benefits of employment, such as a regular wage and statutory rights (including sick pay, holiday allowances and maternity or paternity leave), as well as the luxury of having someone else take care of your tax returns.
While you’ll technically become an employee in the eyes of HMRC, working with an umbrella company still allows you to enjoy all of the advantages of the freelancer lifestyle. That includes organising your own schedule, choosing who you work with, setting your own rates and generally being your own boss.
Choosing the right umbrella company for you
However, you should be aware that not all umbrella companies are created equal. Some provide a more comprehensive package, some offer additional perks and some are just downright more professional than others. With that in mind, it’s not always a good idea to go with the cheapest umbrella company you unearth.
To make sure you find a company with whom you’re capable of forming a long-lasting and mutually-beneficial working relationship, it’s important you choose an outfit that’s a good match for your unique circumstances. Here’s a quick rundown of the factors you should take into consideration before making a decision.
HMRC compliance
This should be a given, but since there are a few cowboy operations out there, it’s imperative you make sure that the umbrella company you sign up with is compliant with its HMRC obligations. Be mindful that the cheapest umbrella company on the market may well offer the most attractive rates, but as a general rule, if it’s too good to be true (offering rates of above 80% take home pay), it’s probably false.
Another important note: any umbrella company which markets itself as HMRC-approved is trying to pull the wool over your eyes, since there’s no such thing. Instead, look out for badges which demonstrate that the company is compliant with the tax office’s rules and regulations.
Reputation
Another strong indicator of an umbrella company’s integrity is their reputation among freelancers who’ve already worked with them. Read online reviews, look into their history and see how long they’ve been around. Any awards they’ve won for their services are also major points for the plus column.
Of course, it’s possible that small start-up umbrella companies which have only just begun trading may offer equally impressive services as their more established counterparts – but taking a risk on one might not be worth it in the long run. A safer option is to choose a bigger name with a reputable track record in the industry.
Payment terms
All reliable and responsible umbrella companies will be happy to issue you with a detailed breakdown of how your wage will be calculated and when it will be paid, including any deductions for things like pensions payments, tax commitments, NICs and, of course, their own fee. If they refuse to do so, steer well clear.
The same goes with regard to the regularity of your own wage. Will they offer same day payment? If they do, do they charge more for the privilege? Any company which states they will only issue your wage once the books have been balanced at their end is not worth wasting time on, since that’s what you’re contracting them for in the first place.
Transparency
On a similar theme, some unscrupulous firms will attempt to portray themselves as the cheapest umbrella company out there, but decline to divulge the particulars of their fee structure or your payment calculations. This is an immediate red flag, since it suggests that there are hidden fees and costs they don’t want you to know about.
These kinds of additional expenses can include (but are not limited to): signing up fees, penalties for leaving, insurance cover costs and charges for administrative tasks. Meanwhile, some companies might advertise their net fees (after tax relief has been applied) rather than gross fees to disguise higher prices.
User-friendliness
For many people, the principal reason for contracting an umbrella company is to simplify their professional lives and make things more efficient and less stressful. A portal which allows you to quickly submit invoices, receipts and other necessary documentation is an absolute must, since it will make your life so much easier.
To get a feel for how user-friendly a company might be in the future, try navigating around their website at will before signing on the dotted line. If things are slow to load, unresponsive or glitchy, ditch them for a more streamlined service.
Service
In the same vein, one of the most important aspects of an umbrella company from a practical perspective is how well and how quickly they can respond to any queries or concerns you may have. If, for example, there’s a problem with a payment and you need to speak to a human at the drop of a hat, service becomes paramount.
The best umbrella companies will offer a 24-hour support line that is always on hand to answer calls and respond to emails. For extra brownie points, they may even offer you a dedicated account manager as your first point of contact. Again, it’s worth contacting the company prior to committing to see how well they respond to you.
Extra perks
Finally, there’s plenty of value to be gained in the additional perks and extras offered by some organisations. The cheapest umbrella company might offer the best rates on paper, but they’re unlikely to have any frills attached.
On the other hand, a slightly more expensive option may offset that added expense with things like reward schemes, discount cards, attractive foreign currency exchange rates, gym subscriptions or childcare vouchers. Look into what they offer, weigh up whether it’s valuable to you and make your decision accordingly.
Compare and contrast
Of course, the easiest way to decide who will best serve your individual needs is to set the alternatives against each other and compare and contrast their pros and cons.
By analysing all of the factors at once and comparing them in one, easy-to-access place, you can make an informed decision on which option is best placed to meet your requirements. What are you waiting for? Take the first step on your journey towards the right umbrella company, today.
