One of the hardest decisions in setting up as a contractor is what employment structure to use. With options to work with an agency, an umbrella, as a sole trader or a Limited Company, where do you start?

Under an umbrella provider, the umbrella company becomes the Employer of Record and you are taxed as their employee, with VAT and National Insurance contributions being retained by them. Whilst not the most tax efficient option, many contractors chose this option because of the reduction in administration, together with the benefits of holiday pay, sick pay and statutory rights. Moreover, with the protection of an umbrella solution, your employment status is clear, so there is no risk of worker misclassification and the associated financial penalty.

So, if all that sounds right up your alley, how do you decide which umbrella company to choose? Here are a few questions you should ask an umbrella provider to ascertain which company is right for you.

1. What payment method do you use?

Many umbrella companies offer same day payments by CHAPS or Faster Payments. If this is not available, move on! Be aware BACS payments can take 3 to 4 working days to hit you account.

2. Do you offer a Service Guarantee?

Some umbrella providers will offer a service guarantee and return your fee if you are not satisfied. It is certainly a question worth asking.

3. What Standards of Compliance does your Company align themselves to?

Many Umbrella companies claim to be compliant but there is little regulation around umbrella solutions, so dig a little deeper. What standards do they align themselves to? There are several professional membership bodies, such as Professional Passport and the Freelancers and Contractors Services Association (FCSA), who can independently monitor service standards from your service providers.

4. Do you offer a secure online Portal?

Simple submission of your timesheets and expense claims will save you time, so the availability of software, that will make this easier, is a consideration. Most important is to understand if any online portal they provide is secure.

5. Will you check my Expenses for Compliance?

Being employed by an umbrella means that you will be able to claim certain expenses, such as mileage and parking. Ask your umbrella company whether they will check your expenses for compliance. Do not be enticed by schemes that tell you how to boost your income by claiming back expenses; only consider reputable schemes.

6. Can you Help me with Business Insurance?

Your Umbrella company will provide your insurance. You will only need to provide insurance if you operate via your own Limited Company.

7. Will I get a Dedicated Account Manager?

A single point of contact will make it easier for you to build a relationship with your Umbrella company. Check what their availability will be and what level of advice and support can you expect?

8. Can you help with any Financial Advice?

Being a permanent employee makes it easier to secure loans and mortgages, so you may be able to take advantage of this. Ask if your umbrella can provide access to financial advice on pensions, investments and other financial products?

9. How much do you charge?

Now that you have an idea what to look for, you can better asses the value when you ask for their fee. Don’t forget to check if there are any hidden extras.

10. Are there any other benefits?

It’s always worth asking this question to see how the company responds. Some may sell you the benefits of working under an umbrella relative to working for an agency, as working for an umbrella will be more favourable financially. Others may look to position themselves as better service providers or advise you of an incentive scheme they are running.

iConsult are a trusted UK Umbrella company, paying hundreds of contractors, without fail, every single day. Now that you are better versed with how to benchmark umbrella schemes, why not take a look at our service. You won’t be disappointed!

This advice is brought to you by iConsult. iConsult have a 6-year track record of providing legitimate PAYE employment solutions to contractors and construction workers. All iConsult’s procedures and processes are regularly independently audited by chartered accountants to make sure they match up to the expectations of HMRC.

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