Our exclusive guide to helping you choose the best umbrella company.
When it comes to choosing the best umbrella company for you, there are plenty of things to consider.
If you’re thinking of joining an umbrella company, or looking to switch providers, there are hundreds of umbrella companies in the UK competing for your interest. It’s a big decision, and one that could have a lasting impact on your financial future. The best umbrella companies provide rewards, security, and the benefits of permanent employment. However, non-compliant companies can cost you time, money and a whole lot more besides.
In this guide, we’ll answer your questions and help you sort the wheat from the chaff of the UK umbrella company market. In the meantime, if you’d like to find out more about umbrella companies and how they work, click here.
1. Can I choose my own umbrella company?
Yes, you’re free to choose your own umbrella company provider. And, in this guide, we’ll give you an idea of what to consider when researching umbrella companies.
That said, it is always a good idea to check if your agency or recruiter operates a ‘preferred supplier list’. And, if suitable, select a provider from there.
2. What is a preferred supplier list?
Unsure what a preferred supplier list, or PSL, is? Here’s what you need to know:
- A preferred supplier list is a list that certain organisations have of the companies, agencies and suppliers that they prefer to deal with.
- They are also referred to as ‘Approved Supplier Lists’ or ASLs.
- In this instance, each recruiter or agency’s preferred supplier list will comprise different umbrella company providers that the agency is confident in recommending to their client base.
- Reasons for an agency’s recommendation range from having an established, positive working relationship with a certain umbrella company; similar and shared values in relation to their service offering; or there could be a prior agreement for the umbrella company to appear on the agency’s preferred supplier list.
Hence the importance of sourcing appropriate accreditations, as well as checking for an umbrella company’s listing on a preferred supplier list.
3. What will my take-home pay be as an umbrella company contractor?
Take-home pay calculators are useful tools to help you work out what you could be getting paid as an umbrella company contractor/employee. They provide valuable information about your potential earnings, to give you a clearer financial picture.
Our FREE take-home pay calculator factors in your contracted rate, pension, tax commitments, payment cycle, and the hours you work each week. Take a look below.
Calculate Your Take-Home Pay
4. Best umbrella company - FIVE things to look for
To help you select the best umbrella company, here are five key factors to consider:
- Compliance – how compliant are UK umbrella companies?
- Reputation – what gives the best umbrella companies their reputation?
- Cost – what margin do umbrella companies retain?
- Approach – what is their approach?
- Benefits – what benefits will I get as an umbrella company employee?
5. How compliant are UK umbrella companies?
Compliance is essential. After all, it’s YOU who stands to come under investigation if there’s found to be any wrongdoing in relation to your tax affairs. So, do your due diligence. Make sure you press prospective umbrella companies on their marketing claims. And, check whether they’re independently audited. This is your livelihood and you need to know you’re dealing with a provider whose affairs are clean, clear and above board.
Don’t forget, all UK umbrella companies are governed by the same HMRC rules. More often than not, if a potential provider promises things like ‘receipt-less expenses’ or conspicuously high take-home pay, it’s probably best to steer clear. Work on the basis that if it sounds too good to be true, it probably is.
6. What gives the best umbrella companies their reputation?
Choosing the best umbrella company from what is quite a convoluted marketplace can be tricky. But there aren’t many industries where you’re able to select your own employer. It’s a unique position to be in. So, make sure you get it right. You do not want to be out of pocket because of a dishonest, non-compliant provider.
The best umbrella companies are often experienced and well-established with a good reputation and a string of positive reviews. You should also note that some agencies receive commission for endorsing certain umbrella companies on their preferred supplier list. This reduces the impartiality and authenticity of their recommendations. So, be thorough and be sure to consult people and sources you trust, whether it’s a peer, an industry forum, or an article such as this.
In short, do your research! Check the accreditations of any prospective umbrella company. For example, the FCSA and APSCo are both desirable regulators to receive endorsement from.
7. What margin do umbrella companies retain?
Umbrella companies retain a margin to cover the cost of contractor employment. This includes the admin costs of processing any necessary deductions – such as tax and National Insurance contributions (NICs) – and sending them to HMRC. The margin amount is the only variable that should differ between umbrella companies.
Our advice? Avoid any umbrella companies with entry fees, exit fees, or minimum term tie-ins. You might also want to rule out umbrella companies that link their margin to your rate. This can prove costly – and unfair – with the potential for your fees to rise exponentially along with any rate increases. Remember, it’s you who’s putting the work in. The best umbrella companies will understand that, and should therefore have clearly defined, fixed fee structures in place.
8. What is their approach?
When searching for an employment provider, it’s important that you consider their approach to contractor care and how they treat you as an individual. The best umbrella companies will strike the right balance between structure and professionalism, while offering contractors a personal service. This is particularly significant as we move into a post-COVID landscape.
Whilst automated or online solutions may cost less, being able to interact and discuss your questions and concerns with an expert advisor can make all the difference. Dedicated payroll teams, HR departments, and experienced personnel can look after your interests in a way no faceless, automated system could.
9. What benefits will I get as an umbrella company employee?
Your umbrella company is your employer. So, there’s no reason you shouldn’t get many of the same benefits that traditional employees receive. This includes things like:
- Statutory Employment Rights. When you join an umbrella company, they should convey your statutory employment rights to you. This includes things like sick pay, holiday pay, maternity pay and paternity pay.
- Continuity of Employment. A sense of security is something that the best umbrella companies should be able to provide to contractors like yourself. Whilst you might have multiple contracts in the pipeline, with an umbrella company you’ll only ever have one employer. As a result, it may be easier to borrow money or apply for a mortgage, for example.
- HR Support. As with traditional employees, umbrella employees should have access to a professional HR department to support them where necessary. That specialist support can range from anything between notice pay disputes to unfair dismissal. The quality of support, of course, varies between providers depending on the company’s stature and experience.
- Insurance. Whichever umbrella company you choose, you’re going to need insurance. Certain umbrella companies provide necessary cover, as standard, to enable you to perform your work in a safe and secure manner. The best umbrella companies will provide additional cover at no extra cost.
- IR35. One final benefit of umbrella company employment, for many at least, is the effect it has on your IR35 status. The legislation targets those who falsely position themselves as sole traders or limited company contractors to avoid paying Income Tax and NICs, when they should be classed as employees. As an umbrella company employee, though, you don’t need to worry – you’re outside IR35.
10. How do I join an umbrella company?
Once you’ve found the best umbrella company for you, it’s often pretty straightforward to join. And, with most UK umbrella companies, you can now sign up online and get set up in under 24 hours.
Whilst certain details may differ, the general process is similar between providers. You’ll be asked to provide certain legal documentation (ID, Right to Work, P45) as well as your name, address and banking details.
You’ll also need to inform your agent/client about your new umbrella company. An agreement will then be signed between the two.
When you’ve provided the necessary ‘paperwork’ – and have read, accepted and signed the umbrella company’s terms and conditions and contract of employment – you’ll become their employee.
11. What paperwork will I need to join an umbrella company?
As your employer, it is your umbrella company’s legal right to ask for the following credentials:
- Your name and address
- Bank details
- Proof of identity
- Proof of your right to work in the UK
For tax purposes, you may also need to send the umbrella company your P45 form from your previous employer.
12. Which is the best umbrella company in the UK?
With hundreds to choose from, there are plenty of reputable umbrella companies in the UK. Choosing the best umbrella company for you is a crucial decision for you and your career. It’s one that will dictate when, how, and how much you get paid as a contractor
The very best umbrella company providers offer compliance, security, and benefits similar to those received by a ‘full-time’ employee.
Danbro are one of the UK’s leading umbrella companies, supporting contractors like you with admin, exclusive employment benefits, and ensuring you get paid in full and on time, every time. Here’s a brief summary of what Danbro offer as an umbrella company:
- Weekly payments
- Danbro Rewards
- BUPA Cash Plan*
- Full statutory employment rights
- The Danbro Group SIPP pension scheme
- Public Liability, Professional Indemnity & Employers’ Liability insurance
- Dedicated customer care team
- Discounted Self-Assessment tax return
- Online timesheet portal
- No set-up or exit costs
*Terms, Conditions & Exclusions Apply
Danbro’s dedicated team will give you a full consultation and you’ll also receive a sample calculation to give you a better idea of your take-home pay.