Umbrella companies have been around for years, but since the recent changes to off-payroll legislation (IR35), there has been a noticeable rise in the number of umbrella companies targeting UK temporary workers. With so many options, how do you know which umbrella company is best for your circumstances, and what should you be aware of when selecting one for your payroll?
HMRC is continuously stepping up their efforts in catching contractors engaging with non-compliant payroll services; choosing a compliant umbrella has never been so crucial. To help you make well-informed decisions, we’ve come up with eight useful tips to help you pick an umbrella company you can truly rely on.
Take home pay projection
Tip: Understand how the umbrella company has prepared your take home pay projection
Most umbrella companies will be more than happy to provide you with a take home pay projection. However, you must be careful. It is common for unethical umbrella companies to manipulate the amount you are projected to take home – to try and fool you into choosing their company over any others.
When you are getting a take home pay projection, make sure the following have been taken into account:
- Has the projection allowed for time off work, and is the projection realistic? We’ve seen some umbrellas basing their calculations on 52 weeks in a year, which is very unrealistic.
- Has the £100,000 abatement been taken into account?
- Has the umbrella company included expenses, even though it’s unlikely you’ll be entitled to claim them?
- Has the calculation used a sensible tax code, or has the umbrella company used one that may inaccurately boost your projected take home pay?
- Has the umbrella been transparent regarding the margin? Some providers will quote you their net margin, which means they’ll be pocketing more than you think they are.
Churchill Knight will give you an accurate take home pay calculation based on your circumstances. However, we will always make you aware that take home pay projections can vary slightly from what you are actually paid, and this can be due to a number of factors. For more information, please visit our blog: Why are umbrella companies quoting me different take home pay illustrations?
Tip: The only thing that will alter your take home pay amongst compliant umbrella companies is their margin. Knowing this will help you make a better-informed decision.
Every umbrella company (providing they’re compliant) will process your pay in exactly the same way (PAYE). This means that the only thing that should impact the amount you take home each month is the margin an umbrella charges for their service.
For example, if Umbrella A has a margin of £25 per week, and Umbrella B has a margin of £15 per week, you will take home a few extra pounds with Umbrella B – and that is it! Everything else should be the same, including income tax, National Insurance Contributions (NICs), the Apprenticeship Levy, etc. The rate of tax and NICs are set by HMRC and umbrella companies have no control over these.
What is an umbrella company margin?
The margin is the amount an umbrella deducts from your pay to cover their own costs, including administration, staffing, rent, equipment, etc.
Simple and compliant registration process
Tip: Understand that umbrella companies legally require specific information in order to pay you. Therefore, if you think an umbrella is cutting corners, or are not operating professionally or ethically – stay away.
In order to legally pay you, umbrella companies need specific information, including:
- Personal information – name, address, National Insurance Number, etc.
- Proof of your identity
- Right to work in the UK
Providing the information above may sound frustrating and time consuming However, it’s a legal requirement and something that you will have to do each time you register with a compliant provider. If you join an umbrella that doesn’t ask for the above information – alarm bells should be ringing.
Registering with Churchill Knight Umbrella is straightforward and you can be set up and ready to get paid by us in under 15 minutes! You can register at your own leisure by completing our online registration form. Or, you can register over the phone by calling 01707 871622.
Tip: Pick an umbrella company that will provide you with more than just a payroll service. There are some excellent perks out there – so take a look for yourself. However, don’t ever be tempted by a tax avoidance scheme…
Umbrella companies will process your pay, but did you know they can offer you more? It’s common for umbrella companies to offer a host of “extras” as a way of encouraging you to use their service. It is really down to you to decide if any of these extras are valuable to you or not.
The most common extras that umbrellas will offer to their clients include:
- Insurance cover
- Same Day Faster Payments
- Employee Discount Scheme
- A mobile app
- Online portal
- Referral rewards
Make sure you do your research – you may as well choose a company that offers you a load of extras!
Warning: Watch out for tax avoidance schemes
Compliant umbrella companies will offer you little extras as a thank you for choosing them. However, tax avoidance schemes will deliberately try and mislead you by offering unethical things, and that could land you in serious trouble. If you see any phrases such as “pay less tax”, “IR35 friendly”, “keep 90% of your pay”, or similar – do not engage with the company.
For more information, please visit our page: How to spot a tax avoidance scheme
Every Churchill Knight Umbrella client will have access to a number of exciting perks, including free £25 million insurance, Same Day Faster Payments, Employee Benefits, a dedicated Account Manager, no joining or leaving fees, and more!
Tip: Only choose an umbrella company that offers you the level of customer service you expect.
As a client of an umbrella company, you deserve a decent level of customer service. Make sure you only engage with an umbrella that offers the level of service you are happy with. An excellent way of gauging whether or not an umbrella company has good customer service is to check their website. Some companies hide their telephone number and have an annoying email ticketing service instead. If you have any questions or concerns, give them a ring and get answers before you register. This way, you can move forward with complete peace of mind.
Customer service also leads into transparency – and this is our next section.
Churchill Knight Umbrella clients will have access to unlimited telephone support and the assistance of a dedicated Account Manager. We do everything we can to answer your questions as quickly as possible.
Tip: Ensure the umbrella company you choose is transparent and they are not hiding anything from you. Ask as many questions as you can.
Some people love surprises. Others hate them. Whatever your stance on surprises, you’ll want to be sure you don’t get any from your umbrella company once you have completed the registration process.
Deductions to your pay
Other than the umbrella’s margin, you should not be required to pay any additional costs. However, while you’ll be paid in a very similar way to permeant employees (PAYE), you’ll notice a few extra deductions on your payslip, including the Apprenticeship Levy and Employer’s National Insurance. These deductions should have been explained to you before you completed the registration process. For more information, please visit our blog: Umbrella Company take home pay: what should you retain?
Most ethical umbrella companies will not charge you a joining fee or a leaving fee. Make sure this is definitely the case when you register, and don’t be afraid to ask difficult questions.
As a result of legislation changes in 2016 (Supervision, Direction and Control), a majority of umbrella users are no longer able to claim expenses. Make sure any projections you receive from umbrella companies do not automatically includes expenses – because it’s unlikely you’ll be able to claim them once you register. Also, if you find that an umbrella is promoting the fact they allow expenses – be very wary. They are probably breaking the law.
Churchill Knight Umbrella will explain your payslip and deductions to you in detail before you register. And, once you have joined, you’ll be able to access an example payslip – for your reference – and a real payslip will be issued each time we pay you. There is absolutely no joining or leaving fee, and no tie-in period. Our margin will only apply to the weeks/months we pay you.
Accreditation and compliance
Tip: Only choose an accredited umbrella company for your payroll. The UK’s leading professional body is the FCSA. Therefore, if an umbrella company is FCSA accredited – you’ll be in safe hands.
The best way for an umbrella company to showcase its compliance with UK law is to earn a prestigious accreditation from a well-known industry body.
The FCSA is the UK’s leading professional body that is dedicated to ensuring the supply chain (including accountants and umbrella companies) of temporary workers is compliant and ethical. To achieve FCSA membership, umbrella companies must undergo a thorough series of assessments and audits.
When you are deciding which umbrella company to choose, make sure they are accredited by the FCSA, or another well-respected industry body.
Churchill Knight Umbrella is proudly accredited by the FCSA. For more information, please visit our blog: FCSA confirms Churchill Knight has gained coveted accreditation.
Tip: Make sure the umbrella you pick has been around for a while and has a respected reputation.
The number of umbrella companies in the UK seems to be rising every week. With so many to choose from – how do you know where to start? The answer is straightforward – only use an umbrella company with a proven track record.
Umbrellas that have been around for years have established themselves within the marketplace. Therefore, there is a high chance these companies are compliant with HMRC and offer a quality service. Unfortunately, many new umbrella companies are tax avoidance schemes. Using a tax avoidance scheme, even by mistake, could land you in serious trouble with HMRC.
Churchill Knight has over 20 years experience and has built a reputation we’re proud of.
Founded by an IT Contractor in 1998, Churchill Knight has become one of the most respected contractor accountants in the UK. We’ve helped over 20,000 contractors with their accountancy requirements. As well as our accountancy services, we also have an industry-leading PAYE umbrella company and dedicated in-house personal tax department. Whichever service you choose, you can move forward with complete peace of mind. We are proud of the reputation we’ve built over the years, and our FCSA accreditation proves how committed we are to compliance within our sector. Keep reading…