The UK government rolled out the new changes in IR35 in April this year. Unfortunately for the contractors, it made it even more challenging to pick the right umbrella company. However, the contractors currently inside IR35 or those unsure how long they will be contracting might feel that PAYE umbrella companies are great options. Even though it is not as tax efficient as a limited contractor company, a good umbrella company can provide quick contracting solutions to those unsure contractors.
But the question is, how do you choose an umbrella company for contractors? These tips will help you do exactly that.
Understand if an umbrella company is a suitable option for you
Which one to pick; A Limited Company or an umbrella? One thing when choosing between the two is to determine the best trading solution to fit your bills. Get in touch with a contractor accountant and an umbrella company and explain your situation to get a clear picture. They will guide you through which option is the best for you.
Their reputation and experience
Reputation counts, especially in the case of an umbrella company. So when you’re out there looking for an umbrella company, you must check out the track record of the company and its supporting contractors. And while you’re at it, study contractor forums for counsel and talk to your experienced co-workers on what they think you should go.
A compliant umbrella company will give its contractors an overarching contract of employment. The agreement provides the contractor with access to all sorts of rights and benefits linked to permanent workers. For example, it includes holiday pay, sick pay, along maternity/paternity pay.
If you happen to work for an umbrella company that did not offer you a genuine employment contract, you will realise that you miss several contractor entitlements. Therefore, it makes it quite vital that you check the umbrella company you’re dealing with is a genuine employer and provides you with all the benefits you deserve.
The umbrella company’s margin
When you talk about the pay, the umbrella company’s margin is THE thing that sets them apart from others. Since the government determines the Income tax and National Insurance, they do not affect your payment in any way.
Before getting into anything, it is better to dig deeper and determine what you will get for your money. If you find a cheap yet jolly-looking headline, chances are their service standards are low as well. On top of it, you should also check if the umbrella company will charge any joining or leaving fee or if they want you to remain with them for a specific period.
What is their payment and expenses policy?
When you are researching an umbrella company, you should also check out their payment processing system. A good umbrella provider will run dozens of payrolls every day, making sure you get paid as soon as possible.
The next thing to keep in mind is the umbrella’s expenses mechanism. Most compliant providers will always suggest you keep your receipts for audits and will only entertain lawful claims. However, sometimes, an umbrella firm might allow you to push claims that lack validity and turn it around, so you keep a large part of your money; while it may seem okay with you but if HMRC finds out, then you’ll be in trouble.
The sort of assignments you work on determines the business costs and expenses you can claim and reimburse. It also depends on if the claims are subject to supervision, direction or control (SDC).
Contracting in the UK has witnessed a vast surge in recent years. As more and more people look to contracting, more umbrella companies have sprung up. Unfortunately, this means that while you see several companies that offer great benefits, most of them lack quality service. Hence, it becomes way more critical that you research well into an umbrella company before you sign up a contract with them.