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Posted 12th December 2018

A guide to spotting a compliant umbrella company

There are a number of reasons why a contractor will choose to work with an umbrella company to support their contracting career, however failure to choose a reputable umbrella company to work with can create countless issues further down the line.

Why use an umbrella company?

One of the main reasons for registering as an umbrella contractor is the burden of financial administration which can significantly detract from a contractor’s main business focus, a burden which is drastically reduced when working with an umbrella company.

In addition to this, whilst the flexibility that contracting offers is desirable, it lacks the security that employment provides, such as holiday pay, and therefore registering with an umbrella company will ultimately provide employment security whilst a contractor continues to enjoy the freedom of their contracting work.

The benefits that contracting under an umbrella company can bring are, however, reliant on the umbrella company itself, their customer service levels and how compliant they endeavour to be. There have been many cautionary tales told about umbrella companies due to a very small minority of unscrupulous companies that take advantage of the contractors that have entrusted them with their income.

So how can a contractor differentiate between an umbrella company with less than stellar compliance procedures and one that is dedicated to providing a high quality, compliant service?

Spotting a compliant umbrella company

Accreditations

An umbrella company that claims to be compliant will have the accreditations to back them up. Particularly look out for umbrella companies that highlight the fact that they are audited by a specialist tax advisor, as this is a key component to an umbrella company’s dedication to remaining compliant.

Regular reviews of status

An umbrella company should take the time to regularly review and discuss each contractor’s situation to ensure that they continue to work on the right route. Often as a contractor’s career progresses and their hourly rate rises it can reach a level to which it is much more tax efficient to establish their own limited company.

Asking a potential umbrella company outright how often these reviews take place is one way to discover (if you believe they are trustworthy), but also seeking the opinion of fellow contractors registered with said company.

Recommendations

When sourcing work through a trusted recruiter, it is beneficial to ask said recruiter for recommendations of umbrella companies they work with. Recruiters curate preferred supplier lists of umbrella companies that they have worked or are working with and are confident in their ability to provide a great service to contractors.

Spotting a non-compliant umbrella company

Identifying a questionable umbrella company can often be a culmination of a number of signs, however one of the major signs to look out for are promises that look too good to be true (because they usually are).

Promises of higher take home pay than other umbrella companies, lack of information on their services, hourly rates that fall below National Minimum or Living Wage, offering expense claims to all without checking SDC status, are just some of the key identifiers of a non-compliant umbrella company.

Working with the right umbrella company can significantly benefit a contractor’s working life. However, choosing the wrong company can lead to issues with income, non-compliance with HMRC and so many other issues, therefore it is vital that contractor’s have the knowledge necessary to pinpoint the right umbrella partner.

Are you looking to work with a complaint umbrella company? Speak to our expert team today!

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