Whether you are new to contracting or you have been contracting for many years, choosing the right umbrella to work for is a vital decision to be made on an individual basis. Many contractors overlook the importance of this decision, unaware of the potential risks that they expose themselves to when choosing an umbrella company.
Using an umbrella company means that you become an employee of it. All good umbrellas will pay you the correct wage on time, every time, whilst providing responsive and knowledgeable support to deal with the many queries and issues that its employees have, you included, and those that are particular to contracting. Unfortunately, there are pitfalls and traps for the unwary that can cost a contractor dearly. They range from occasional underpayments and irregular ones right up to HMRC liabilities if you get involved with an unscrupulous umbrella. – Often these umbrellas will assure you that a take home pay of 90% is approved by HMRC and complaint. It absolutely will not be, so it would be in your interest to contact the umbrella to ascertain how they are achieving these levels of pay and how you might be at risk.
So, how do you find the right umbrella that will treat you properly and not expose you to any unnecessary risk? You should ask fellow contractors for recommendations and ask them to explain how they are paid and what their experiences are. Be mindful that if you ask your agency, they may not be giving you an objective recommendation.
Regardless of how you choose your umbrella, it is essential that you do your own due diligence to the full extent that you are capable of. You need to ask the right questions and, critically, get everything in writing.
We will soon publish useful articles on the right questions to ask of your prospective umbrella and in more detail explain the pitfalls and traps for the unwary.
Despite the fact that in the UK there are hundreds of thousands of people working in the temporary workforce sector, it might come as a surprise that umbrella companies are not actually regulated. That’s right; no governmental sector regulation of any kind. There are many laws that apply to them as they are employers and businesses, much like any business, but they are not regulated by an industry specific, independent designated regulator that can protect contractors and sanction unprofessional umbrellas.
Thankfully, change is coming as the government has finally woken up to the need for regulation, but that is likely to be around two years away. Unfortunately, in the meantime, contractors have to decide on their choice of umbrella based on their own due diligence as well as any indication of reputation that they can find.
We will be keeping you updated with news on progress being made by the government over regulation.
If you have any comments in relation to government regulation, submit them here.
Unfortunately, as previously mentioned when detailing regulation, the title ‘accreditation’ is applied in a very loose sense and not in the formal ‘government approved’ sense; the latter being the recognised accreditation which many contractors will be familiar with through their years of training to achieve qualifications.
The non-government approved ‘accreditation’ term is one that the sector has informally developed when organisations have created their own rules of conduct within which umbrella members should, in practice, conduct their businesses. Undoubtedly, there is a legitimate place for such organisations and their own rules, but they are by no means flawless and they do not come without risks if a contractor chooses the wrong umbrella member.
Below is a list of the organisations that have set rules to which members should comply.
If you have any comments in relation to umbrella accreditation, submit them here.
The FCSA is a trade organisation made up of umbrella members as well as other businesses involved in the sector that provide various forms of payroll services. It is self-regulated and has a defined public code of compliance that members are required to adhere to.