We’re often asked by agencies what they should be looking for or what questions they should be asking when they are looking to put together a PSL (preferred supplier list) or are considering working with a new Umbrella company. The usual answers are compliance levels, customer service approach, flexibility with payment deadlines, AWR processes, right to work processes, self employed or not processes etc .
All of these are important of course but it amazes me how few agencies credit check the Umbrella company in question. It amazes me because the agency is literally trusting the Umbrella company in question to ensure the contractors are paid on time. It won’t matter what the customer service levels are like, if the contractors don’t get paid on time due lack of finances at the Umbrella Company then the sites will all grind to a shuddering halt.
When working with a small or newer Umbrella Company where cash flow or working capital is not strong, it is possible their overall payroll could be adversely affected if they run into difficulties with payments from another agency. A large, financially robust Umbrella Company (of course with all of the other required ingredients) has the financial firepower to ensure all contractors are always paid regardless of the receipts from other agencies and can even support their agency clients through sticky times by prior arrangement. When an agency sends the funds for payroll to its Umbrella Company it is literally lending them this money, albeit for what is supposed to be a very short amount of time. I don’t know of any other situation where this would happen without the recipient being credit checked first.
If in doubt, run the credit check, at least then you can make an informed decision with all the facts at your disposal.
