Umbrella companies can be confusing.
With every umbrella marketing themselves as the “cheapest” or that they will “maximise your income” how can you be sure you’ve chosen the right one to work with? If you add a non-compliant umbrella to your PSL, there can be repercussions for your workers and your agency both financially and reputationally.
Our blog today should help you recognise how a compliant umbrella company operates and help you to make the correct decision when adding a new umbrella to your PSL.
You might be tempted to do what we all do when we need a question answered- Google it! But Google will return hundreds of results for umbrella companies, some which may be based overseas or be the front for a fraudulent business.
A better place to start is a website such as Professional Passport.com. Professional Passport is the largest independent specialist assessor of umbrella compliance in the sector, and on their website is a list of umbrella companies that they have deemed to operate in compliance with HMRCs interpretation of relevant legislation.
All umbrellas charge a margin for their service. A non-compliant umbrella might charge as little as £6.00 per week, however this is simply not sufficient for them to cover their costs and account for the payments that must be made as an employer.
At the time of writing, the average umbrella company charges £25.00 per week, but you can still shop around somewhat. For example, Umbrella name charges only £15.00 per week whilst being 100% compliant.
Your temporary workers might avoid umbrella companies as they feel too many deductions are made to their pay. On an umbrella workers payslip, you should expect to see deductions for tax, National Insurance (employer and employee), the apprenticeship levy and margin. However, you can remind your workers that recruitment agencies generally increase the rate of pay for umbrella company workers to accommodate for these deductions.
As employees, umbrella workers will be entitled to holiday pay for their time off. In accordance with statutory holiday entitlement, holiday should be calculated at 12.07%, and workers should be able to choose whether holiday is paid when they take it or each month as it’s accrued.
Using an umbrella company often comes with added incentives which makes the cost to the worker more manageable. For example, Umbrella Name includes a subscription to Flexr Rewards, the employee engagement platform consisting of offers, discounts and freebies, within their margin. Umbrella Name umbrella workers are also covered by Employers Liability, Public Liability and Professional Indemnity insurance.
By researching each of these issues, you will surely pick the right umbrella company in no time!
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