Compare The Umbrella: A Guide To Make The Best Choice


 Umbrella company is a standard limited company that has been growing in recent years in the United Kingdom. An umbrella company appoints various contractors who work on the company’s assignment. This is done by a contract that is signed between the company and the recruitment agency. The contractors that are hired are recruited to the company with the help of a recruiting agency. The umbrella company acts as a third party as well as an employer on behalf of its contractor employees. In simpler words the three important bodies that are important for an Umbrella company are:

  • Client: This refers to the company that is hiring the contractors. The client selects the contractors who are not burdened of the legal requirements as in the case of permanent employees.
  • Agency: It performs the recruitment task for the client. Some recruitment also provides a PAYE (pay-as-you-earn) scheme as a part of their offer. This attracts people.
  • Contractor: This is the most important body since all the work is done by the contractor. He completes the work, the timesheet and submits them along with his expense claims if any.

How does an umbrella company work?

All the UK based umbrella firms follow the same procedure. After one gets a contract role, the umbrella company signs a contract with the recruitment agency. The contractor then starts working and becomes an employer. Once the contractor completes his/her time on the site, the timesheet is completed and is passed on to the manager. The manager as a representative of the contractor further submits the timesheet to both the company as well as the recruitment agency. The umbrella company then invoice the recruitment agency which in turn pays the company the required amount. After that, the umbrella company prepare the payroll for the contractor. Before joining one should compare the umbrella companies.

Comparing the umbrella companies:

 The comparison can be done on the following basis:

  • Payment: Since people work to earn money, it is important for a contractor to be clear about the payment. For instance, one needs to know whether the company charges on taking a day off. Does the company charge a fixed weekly or monthly value? Moreover, one also needs to be aware of the time they might take in paying the money back after the completion of work.
  • Expense dispensation: So, if the company proposes extra expense dispensations then one needs to be careful since expenses are already a part of the contract.
  • IR35: It is important to note that this is irrelevant for umbrella company contractors as a contractor is taxed under the normal PAYE condition i.e., as an employee.
  • Recruitment agency: If you are joining through a recruiting agency then one should go through the umbrella companies the recruiters have signed a contract with. This refers to basically exploring the best options.

Apart from these main points there are other points that need to be kept in mind when one compares the umbrella companies such as customer friendly environment, pensions, easiness in switching, etc. Therefore, if one wishes to be a part of any umbrella company one should look up the companies and compare them on the aforementioned basis so that one can get a secure, well-regulated and fairly priced umbrella company.