Choosing a Contractor Umbrella Company
Here are some things to think about when choosing a contractor umbrella company.
1. How much are the fees?
The fees vary from company to company and they include different things.
Always make sure that you are comparing like with like.
You could get a really cheap Umbrella Company and then find that the service is pretty basic.
2. Do I have to pay any money when I leave the company?
Some Umbrella companies insert penalty clauses in the small print of their contracts which make it expensive for contractors to leave the company if they want to change or just don‘t like the service.
Always ask if there are any of these.
3. How often will I get paid?
Some Umbrella Companies will pay you monthly and some weekly and for some it will be timesheet dependent.
4. How soon will I get paid?
Some Umbrella Companies will pay you even before they get the money themselves.
They will pay within a day or so of getting the timesheet – or even on the same day.
Others will wait till they get paid by the client or agency and this could take a while.
5. Is there any Indemnity Insurance?
Some Umbrellas will include the insurance free with the package.
Some will try and sell it to you as soon as you‘ve joined.
6. What size of company are they?
You can ask this question by turnover or by numbers of contractors.
There are several big players but there also new brollies springing up all the time – with some of them disappearing just as quickly.
You don‘t want one of the latter.
7. How long have they been around
Some of them have been around since IR35 legislation was passed in 1999 whilst others may have been set up in the past year or so.
You are, obviously, much safer with the former.
8. Ask the background of the owners of the Umbrella Company
You‘ll find some that are from an Accountancy background and some who are ex-IT Contractors and probably some who were snake oil salesmen.
Some people may prefer to have someone with an Accountancy or tax background and others may prefer to have someone who was a contractor like them running their affairs.
And of course, those who don‘t ask the question may end up with the snake oil salesman.
9. What expenses can you claim?
It‘s fairly standard what you can claim in expenses as you can see from our article What Umbrella Company Expenses can be claimed against tax?
If companies are telling you that you can claim for more than that then they are probably snake oil salesmen and you should avoid them.
10. How much tax will I pay?
You may be one of those contractors who has to be part of an umbrella company as you are caught by IR35.
However, you may just not want the hassle of running your own business and doing your own paperwork.
Or, you may have been shoved towards an Umbrella company solution by your agency.
Whichever it is you should have all the facts and figures before you.
You‘ll want to know the bottom line, i.e. how much tax you‘ll end up paying so that you can compare it both with other brollies and with other solutions.
So those are some of the things you’ll want to know when choosing a contractor umbrella company.