An umbrella company will provide all the benefits of being an employee whilst giving you the benefits of flexible working. They’re a great option and save the hassle of setting up and running your own limited company. A successful, properly functioning umbrella company will:

  •  Create and raise invoices on your behalf
  •  Allow you to claim within legal means for incurred business expenses
  •  Pay you accurately and on time through PAYE with correct tax and National Insurance calculations
  • Provide a continuous record of employment with a single company regardless of whether you move from agency to agency or client assignments end
  • Mean you only have one tax code so you should be able to avoid overpayment of tax

Some umbrella company firms will also provide you with free insurance cover for public, professional and employer’s liability. Choosing the right company for you however takes some thought and you need to keep many factors in mind.

What to look for in an umbrella company

When you’re choosing an umbrella company there are a range of factors to keep in mind. All umbrella companies are governed by the HMRC which means your earnings won’t be different if you choose a different company. The only key variance to look into is the fees the different companies charge. A reputable umbrella company will not base their fees on their earnings as their level of work is no different whether you earn £15 or £1500 a day. Many companies will quote a percentage of your earnings as their fee and you need to check before any agreements whether this percentage is fair. Fees tend to average around £15 and £25 per week. The only payment structure which is acceptable for any third party company is PAYE so if you’re looking into a company who states they pay by other means such as dividends alarm bells should ring and you should definitely keep them off your shortlist.

Questions to Ask

When you’ve got a shortlist of companies which meet your criteria and seem above board there are a few further questions to ask. You should always check with each potential company whether there are any hidden costs of penalties, should you choose to leave them at a later date. Some companies have penalty fees if you choose to leave them within the first 12 or 24 months. Personal recommendations are probably the most reliable way of finding a company which works well and bear in mind that recommendations through agencies often have a price attached, the umbrella company may have paid the agency to promote their services for example.

The main mantra to keep in mind is simple, if it sounds too good to be true then it probably is! You need to take a close look at company’s which you think will work for you and when you decide which one to go with, ensure that they have the right processes in place to deal with your particular circumstances. It saves a lot of time and effort once you’ve found the right company for your needs.

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