Essential Tips For Comparing Contractor Umbrella Companies

Welcome to the follow up article of covering all things related to Contractor Umbrella companies that you must know if you are interested in becoming a self-employed individual in the UK.

Contractor Umbrella companies experienced a massive growth due to not just the rising numbers of self-employed contractors in the UK but also since 2000 when IR35 came into effect as a law. Due to the IR35 law, Contractor Umbrella companies became the most attractive option for most contract workers.

In order to find the right Contractor Umbrella service provider, you must be ready to do a whole lot of research.

Today, in the last blog of the series (don’t worry… there will be plenty more to come so keep following Comparison Contractor), we will cover some highly beneficial tips and techniques for comparing Contractor Umbrella companies.

As a bonus, we will tell you how you can find reliable Contractor Umbrella company reviews and also, the most commonly asked questions about Contractor Umbrella companies.

All of this information is easily compiled in one place to help you to choose the best Contractor Umbrella service provider among the hundreds.

A Quick Recap

In the first blog, we covered the crucial difference between freelancers and contractors in the UK and who should be using Contractor Umbrella companies. Click here to have quick recap or read it now if you’ve missed it.

In the second blog, we covered the legal steps that are a requirement for a self-employed individual to set up his or her own limited company in the UK and how to get it done. Read it now if you need to set yourself up as a limited company.

In the third blog, we covered how a PAYE umbrella company works in terms of the fees involved, payment processing, invoicing, etc. including the importance of choosing the most suitable Contractor Umbrella companies for saving your hard-earned money. Read it now if you’ve missed it.

contractor umbrella company

Okay now that you are up to speed, let’s get started with the fourth & final blog of this series!

Tips To Know When Comparing Contractor Umbrella Companies

tips to choose contractor umbrella company

1. Contractor Umbrella Company Fee Structure

One of the first things you want to confirm with your chosen contractor umbrella company, is the structure of their fees that they will charge you for their services. We have covered the fee structure for contractor umbrella companies in detail in a previous blog.

The key thing you want to make sure is what they will charge as fee, what the fee will cover and whether you will be charged weekly or monthly for their services. Much like an employment contract you want to find out a few extra things here as well. For example, what happens when you take time off from work, do they continue to charge you or can you pause the services.

In terms of invoicing, you want to find out how often they expect you to submit timesheets, is it daily, weekly or monthly. The length of time it will take for the money to come to your bank account and whether or not it will come in at the same date every week or month. There are faster payments options widely available and find out if your chosen contractor umbrella company offer this feature.

2. Expense Claims & Associated Cost Policy of Contractor Umbrella Company

In terms of invoicing the contractor umbrella company, find out the expenses that qualify as tax write off. Do not fall in the trap of “special” expenses in large amounts which will not be taxed and there are a wide range of things which can be claimed as expenses even without receipts. Many companies may use these tactics to earn your business and put you at risk of tax evasion.

Find out if there are extra or hidden costs associated with your chosen contractor umbrella company. For example, is there a joining fee, or a termination fee, or any other sorts of fees which may come back to haunt you at an unexpected time.

Most reputed contractor umbrella companies do not charge any extra or hidden fees.

3. Contractor Umbrella Company Compliance & Insurance

One crucial aspect of dealing with a company is finding out information about the company itself.

You need to find out if it Is registered, if has a fair number of clients, if it is compliant with Agency Workers Regulations, and what clients are saying about this company in reviews.

Many companies will use vague terms which do not hold any meaning such as “HMRC compliant” or “IR35 compliant”, etc. Most of these are used as attention grabbing words with no real benefit.

You want to find out when the contractor umbrella company was established, where does it operate, and if it is a trusted and reputed company.

It is typical for contractor umbrella companies to offer PI insurance coverage or Professional Indemnity insurance in addition to things like public liability policy, employer’s policy, etc. you want to make sure that if your specific skill is covered, then you want to be insured.

4. Happy Clients & Recommendations

As a potential employee of a PAYE contractor umbrella company, you are solely responsible to conduct sufficient research to know if existing clients of this umbrella company are satisfied with its services. You can search through online reviews, contractor testimonials and ratings, etc.

Keeping clients happy says a lot about a company. Also, you want to see if other contractors are recommending a particular contractor umbrella company. On the other hand, if they are saying to stay away from a specific company.

Nothing beats a recommendation from a contractor in the industry just like you. So, ask your community for feedback and recommendations about contractor umbrella companies they have used or currently use.

We will cover a little more about online reviews later in this article.

5.Technology Used By Contractor Umbrella Companies

Look into companies that are actually adapting to the advancements in technology.

Go for a contractor umbrella company which has a nice computer system which is user-friendly and allows you to input things like your timesheet details, expenses, etc.

You don’t want a company that still actually collects timesheets on paper only.

6. Contractor Umbrella Company Pension Schemes

Look into umbrella service providers that offer pension schemes.

As a PAYE employee you can benefit from pension schemes, tax breaks, etc. and one of those things is Maternity Rights.

You don’t get if you don’t ask!

Comparison Contractor is a specialist provider of advice and information about accountancy, support services for contractors in the UK, including freelancers and all sorts of self-employed individuals. We prepare and present to you all the most essential guides for contractor umbrella companies.

Guide To Contractor Umbrella Company Maternity Rights

As you may have already realised, there are many advantages of working with a PAYE contractor umbrella company. In essential tips number 6, we were discussing the possibility of pensions schemes and other benefits that many contractor umbrella companies offer.

One such benefit that is your right to claim is the statutory maternity pay. We will now cover some this contractor umbrella benefit in detail. We will cover whether or not you qualify and how to qualify, what exactly you are entitled to, when it starts and of course, how you can claim it from your chosen contractor umbrella company.

How To Qualify For Statutory Maternity Pay Under Contractor Umbrella Companies

First of all, to be considered eligible for Statutory Maternity Pay, you need be employed continuously with your current Contractor umbrella Company for a certain amount of time. The time is determined by weeks as well as your baby’s due date.

So, from the 15th week of when your baby is due, you must be in continuous employment by the Contractor umbrella Company in the 26 weeks before that.

Now, this may be a bit confusing, but think about it the 15th week before your expected date of delivery. At that point, you must be employed with that Contractor umbrella Company continuously for at least 26 weeks.

So, let’s look at some dates – for example, if your baby is due on 31st December 2019. Then, you must find the date go back 15 weeks which is approximately the end of September 2019. So, by September of 2019, you must be employed by your Contractor umbrella Company for 26 weeks.

There is also an additional eligibility factor other than the duration of employment, which is the minimum earning level known as Average Weekly Earnings (AWE). The minimum required weekly earnings or the Average Weekly Earnings (AWE) must be at least £118.

As an added authorisation, you must submit a form to your Contractor umbrella service provider. This is known as the MAT B1 certificate, it must be submitted 28 days before the date of your maternity payments begin. So, if this is not met, you stand to get delayed payments.

For any reason, if you are unable to provide the MAT B1 certificate, you can also choose to supply acceptable evidence of your pregnancy in similar time frames. However, it is best to make sure that you hand a MAT B1 certificate form to your Contractor umbrella service provider.

Get More Information About Maternity Allowance and Employment and Support Allowance From The Official Website.

What You Are Entitled To Receive From Contractor Umbrella Company’s Statutory Maternity Pay

Statutory Maternity Pay or SMP’s first payments start from 90% of the amount of your minimum required weekly earnings or the Average Weekly Earnings (AWE). This is what you are entitled to receive for the first 6 weeks from your contractor umbrella company. Note that this amount is before tax deductions.

After the initial 6 weeks, the amount you receive will be reduced to £148.68 or 90% of your minimum required weekly earnings or the Average Weekly Earnings (AWE) – whichever is lower. That amount is what you are entitled to receive for the remaining 33 weeks of your pregnancy from your contractor umbrella company.

As we mentioned, these amounts are all before tax. Statutory Maternity Pay or SMP is paid through the PAYE system. So, the same way that your contractor umbrella company wages are subjected to income tax and National Insurance deductions, they too will be taxed.

As a result, if you earn more and have higher Average Weekly Earnings (AWE), then you will likely be getting more in Statutory Maternity Pay. But also, you will be paying more in income tax and National Insurance contributions. This is why it is beneficial to get expert advice from your accountant before you apply for Statutory Maternity Pay from your contractor umbrella company.

What Happens If You Do Not Qualify For Statutory Maternity Pay From Your Contractor Umbrella Company

Do not worry if you missed the eligibility period of your employment or your minimum weekly earnings. For those who were not employed with a contractor umbrella company for 26 weeks prior to the 15th week from your delivery, there are other options.

Your contractor umbrella company will provide you with a SMP1 form upon your ineligibility for Statutory Maternity Pay. This form will allow you to get Maternity Allowance (MA).

You have to take the SMP1 form to the Job Centre Plus or local Social Security Office. Then, they will assess your qualification to get Maternity Allowance (MA). At this point, even if you were not to be qualified, do not lose hope.

Another benefit that you still be eligible for is the Employment and Support Allowance (ESA). The eligibility for this will be checked automatically by the Job Centre Plus or Social Security Office.

When Statutory Maternity Pay Under Contractor Umbrella Companies Start

We have covered the primary, secondary and even the last resort for you to get some sort of maternity allowance as contractor umbrella company employee. Now, lets look at when your payments will start for Statutory Maternity Pay.

Upon your successful qualification for receiving Statutory Maternity Pay, you will get payments by the 11th week of your pregnancy. As mentioned earlier, you must inform your contractor umbrella company at least 28 days from the day you expect your payments to start.

During your maternity leave, contractor umbrella service provider will ensure the timely disbursements of payments accordingly.

It is industry best practice to inform your contractor umbrella employer at least 8 weeks before you return to work. This ensures that your return to work is known, and prepared with any changes or necessary adjustments.

How Much Can You Claim From Contractor Umbrella Companies As Statutory Maternity Pay

As we have discussed above, the Statutory Maternity Pay or SMP are tax deducted amounts. You cannot claim any more than the predefined amount which is 90% of your minimum required weekly earnings or the Average Weekly Earnings (AWE).

This amount will reduce or become a fixed amount of £148.68 or 90% of your minimum required weekly earnings or the Average Weekly Earnings (AWE). You will receive whichever is lower between the fixed and the 90% for the remainder 33 weeks of your leave.

Other Crucial Days For Taking Time Off

However, you can claim other days off or some extra perks.

You can work for up to 10 days during your Statutory Maternity Pay period without losing it. During these working days, you are not even required to work full days, but only a few hours here and there.

Regardless, they will count as full working days and you can do for all 10 days.

These extra 10 days of work are given to take any necessary training, or occasional duties to make sure overall work plan is not disturbed when you return to work. You can choose to work 10 days altogether or even a single day here and there over the period of your Statutory Maternity Pay.

In addition to this, contractor umbrella company maternity schemes also all time to be taken off for ante-natal care. This means as per the Agency Workers Regulations 2010, contractor umbrella employees will be able to attend ante-natal sessions while being fully paid.

If you think that you are missing out Maternity rights, assistance or benefits, then contact your contractor umbrella company today and find out what you need to do and how soon you can start getting your maternity rights.

7. Switching Contractor Umbrella Service Providers

If at any point you are not happy with a company, feel free to move from your current provider to another. There are many available in the market and the competition will always offer something better. So, do not hesitate to move to a new contractor umbrella company.

How To Find Contractor Umbrella Company Reviews?

We said that we would cover a little bit in detail about contractor umbrella company reviews. Before you choose a company, it is important you seek out reviews but also, you must be aware of all things that can happen with online reviews.

Understanding Contractor Umbrella Company Online Reviews

  • You will find hundreds and thousands of contractor umbrella company reviews online. But you cannot trust every single one. Owners filter out or remove negative comments so, you may not get the full picture – keep that in mind!
  • Many companies take advantage of fake reviews which is easy to buy and post in hundreds across many sites, so stick to reliable review service providers such as Google My Business.
  • Be aware of contractor umbrella companies with ads. In a matter of few campaigns online, even the newest of companies claim to be number one. So, be sure to judge ads with an inquisitive mind.

Leading Contractor Umbrella Company Review Sites

You must rely on using reliable and trusted review sites rather than just typing in “Contractor umbrella Company Reviews” on Google search.

Google My Business is an example of a trusted review service provider. Also, Trust Pilot is a reliable provider of online reviews. Trip Advisor is also great in terms of customer engagement.

Regardless, it is important to look into the background of a company before signing a contract with them.

Contractor Umbrella Company FAQs – 10 Things You Should Ask

Before you think that you are fully ready to sign up with a contractor umbrella service provider of your choice, there are a number of questions that you should ask to contractor umbrella companies.

contractor umbrella companies faqs
1. What Is Your Fee?

As we covered, you want to make it clear how much the contractor umbrella company will charge you for their services. Make sure to ask about any potential hidden fees such as setup fee, changing service provider fee, etc.

2. What Is Your Payment Cycle – Weekly? Monthly?

You want to understand clearly what your payment cycle looks like. Will you be charged weekly or monthly? When the contractor umbrella company expects your timesheet details and what happens during longer periods where you will not be working, etc.

3. How Long Will It Take To Receive Payment?

Find out exactly how the contractor umbrella company will pay you. Whether it is through faster payments or not, you do not want to wait for a week for the money to hit your bank account.

4. Are There Any Satisfaction Guarantees?

Many contractor umbrella companies offer things like a satisfaction guarantee or your money back. Ask about any such offers like if you are not satisfied with delayed payments, no response to emails or untimely call returns.

5. Will I Have A Dedicated Account Manager?

Find out if the contractor umbrella company will assign you a dedicated account manager. A manager who looks after your account will be your single point of contact for all your needs.

6. Is Business Insurance Included?

Many contractor umbrella companies offer typical public and employers’ liability insurance. You want to ensure that your industry is covered by PI insurance.

7. Will You Provide Me With A List of Expenses?

As you are joining a contractor umbrella company which his reputed for its services, do not fall prey to claiming extra things for saving on income tax. Find out exactly what expenses are covered and act accordingly.

8. What Extra Benefits Will I Receive?

You don’t ask and you don’t get. So, ask about any extra benefits the contractor umbrella company will offer if you join. You can even ask about things like contributory pension schemes, discounts on healthcare or elsewhere, and free legal advice, etc.

9. How Will You Offer Account Security?

You should not avoid asking how they will ensure the security and confidentiality of your private information. Are there online submissions available for things like your timesheets, etc. Find out if the online account will show necessary information which you may need.

10. Are You In Legal Compliance?

Ask about any mobile messaging services or other forms of verification when making account changes. Since many contractor umbrella companies are not legit and may cause you serious problems with HMRC.

The Contractor Umbrella Company Process

Now that you know all about how to compare contractor umbrella companies, the exact questions you should be asking, you may be thinking so how do I get started?

First Step of Contractor Umbrella Company Process

Well, in order for you to be associated with a contractor umbrella company, you must first become a contractor in the United Kingdom.

Do you know what qualifies as a UK contractor? Contractors as you will be fully aware are self-employed individuals.

So, they are not the traditional employee hired by an employer.

Self-employed individuals work independently and they can be classed as being of two types: 1) Freelancers and 2) contractors. Although, you may have the misconception that they are both the same, they are not and you must be qualified as a contractor rather than a freelancer.

There are different legal requirements, HMRC tax requirements contractor umbrella company partnership conditions, etc. associated with each type.

So, it is essential that you decide your self-employment type before considering contractor umbrella companies.

Second Step of Contractor Umbrella Company Process

Once you are ready to work as a contractor in the UK, you must set yourself up as a limited company to use contractor umbrella company schemes.

With the 2019 elections build up, you must have noticed a few things which have been dominating candidates promises such as Brexit and IR35. The IR35 tax review, more popularly known as the contractor tax, is definitely something which holds a lot of importance.

So, you can imagine the importance of legally setting up a limited company to work as a contractor in the UK.

Many contractor umbrella companies, along with contractors have been slammed with tax evasion blames due to the shady use of contractor umbrella schemes.

Third Step of Contractor Umbrella Company Process

Once you set yourself up as a limited company, you will need to understand exactly how a PAYE contractor umbrella company works before signing an agreement as a PAYE contractor umbrella employee.

You must understand the following:

  • how you must register with a PAYE contractor umbrella company
  • how to send your timesheets
  • how to send invoices to your chosen contractor umbrella company
  • what type of expenses can be claimed as a deduction
  • and of course, how much and often you must pay your contractor umbrella company for their services.

Fourth & Final Step of Contractor Umbrella Company Process

The final step is of course, what we discussed in this blog in detail – how to choose the right contractor umbrella company by comparing all contractor umbrella companies available in the market.

You must remember not to be fooled by many positive online reviews and remember to do sufficient background check on your potential contractor umbrella company, before signing a PAYE contractor umbrella employee agreement.

Find out all about their hidden fees, insurance policies, guarantees, how they work and which contractor umbrella companies are most recommended by the contractor UK community including your friends, families, colleagues and the overall online contractor UK community.

Read about all the essential tips for choosing the best contractor umbrella company by scrolling up or clicking here again to refresh your memory!

Final Thoughts

The way to move forward is choosing the best contractor umbrella company.

We have mentioned the many things to make sure that you are in fact choosing a contractor umbrella company is worth your business. Check out reviews and judge them accordingly.

Do not be swayed by advertising gimmicks and make sure your financial future is not put in jeopardy by dealing with fraud contractor umbrella companies.

Now, if you are ready to go off and start working as a contractor in the UK, then you will need to follow the process that we have outlined in the article. This will help you to set yourself up the proper way within all legal requirements by choosing the best contractor umbrella company.

Let us know what you think about all the tips and tricks we shared that you should be using when comparing all the contractor umbrella service providing companies in the UK contractor market.

Learn all about the IR35 Off-Payroll working rules in the United Kingdom by reading this blog on contractor tax and what changes to expect from April 2020.