What To Look For In A Good Umbrella Company

by | Feb 18, 2021 | Blog, Featured, IR35 & Off-Payroll, News, Umbrella

How To Identify A Good Umbrella Company

If the off-payroll reforms mean you’re no longer able to work through your own limited company, then you may need to look for an Umbrella company instead. But with so many Umbrellas to choose from, how do you identify the good ones – and why does it matter?

There are lots of reasons you should choose a good Umbrella company to act as your employer, but the most important issue revolves around compliance. An Umbrella company acts as your employer, so must deduct tax and National Insurance like any other employer, and provide statutory benefits such as sick pay, holiday pay, and access to a company pension scheme.

An Umbrella Company that puts you first will:

  • Be well-established with a proven track record
  • Be a member of the Freelancer and Contractor Services Association, the main governing body of the industry. Chris James, Chairman of the FCSA, is Director of Accounting Services here at JSA
  • Be proactive in explaining how your pay is structured, including all of the deductions made by the Umbrella company
  • Provide a detailed pay illustration showing you how your take-home pay is calculated
  • Be thorough with their onboarding process, just like any other employer, by asking you for ID and doing all the standard background checks to ensure you have the right to work in the UK
  • Provide all the statutory benefits of a regular employer ie. sick pay, holiday pay, maternity/paternity pay, and access to a pension scheme
  • Provide relevant insurance covers such as professional indemnity, public liability, and employers’ liability cover.

 

If an Umbrella is acting non-compliantly, it can leave you exposed:

  • You may not be paying the correct amount of tax if your Umbrella company is operating a fraudulent tax avoidance scheme. If you’re caught, you could have to pay the tax you owe as well as hefty penalties. Tax evasion is a criminal offence, so you could also face the full force of the law.
  • You may not be offered the employment rights you’re entitled to, short-changing you on the benefits that are in place to protect workers.

 

You should think twice before signing up to an Umbrella that:

  • Offers 80% + take-home pay – this is a sign that they may be trying to work around HMRC’s rules
  • Offers to pay you via a mixture of salary and loan, claiming that the loan is a non-taxable payment. This is unlikely to be seen by HMRC as a genuine loan.
  • Makes non-compliant deductions from your gross pay before they calculate the tax that’s due in order to increase your take-home pay
  • Has hidden margins that change according to how much you get paid
  • Adds fees for providing services which should be included as standard, such as same-day payments, references, and the provisions of standard documents
  • Does not proactively provide an accurate take-home pay calculation
  • Deducts money from your earnings to cover statutory entitlements such as holiday pay and sick pay
  • Allows you to claim tax relief on business and travel expenses without taking account of the tax consequences.

 

Understand Umbrella Working

To protect yourself, you must understand how Umbrella contracting works. We’ve put together a useful guide which explains everything you need to know from how your pay is calculated to the benefits you’re entitled to.

What to do next

JSA Umbrella is a fully FCSA-accredited and is one of the largest and longest-established in the UK. Onboarding takes only a few minutes and then we can get you set up and ready to work on the same day.

If you’re affected by IR35 reforms, you’ll find we offer a fully flexible service, IR35 Switch, which allows you to work both ‘inside’ and ‘outside’ IR35 contracts in the same year – using your Limited Company where possible. If you have any questions, get in touch with us on 01923 257257 and we’ll be happy to help!

JSA Group

Specialist outsourced accountancy and payroll services for recruitment agencies, freelancers, contractors and umbrella workers. We’ve built up expert knowledge and experience within the industry by supporting tens of thousands of customers for 30 years.

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