Are all umbrella companies the same?

Are all umbrella companies the same?

Feb 14, 2018


While all umbrella companies provide the same basic services to pay individuals, deduct tax and provide employment benefits, there can be significant differences in the approach various providers take.

It’s important to weigh up the differences and choose an umbrella company which you like and trust, so you can carry out your contract work safe in the knowledge that you are paying the correct taxes and are working in a compliant manner.

Crest Plus is one of the UK’s longest-established umbrella companies and we pride ourselves in giving a first-class service which enables contractors to begin work without delay, plus we have the systems and processes in place to ensure full compliance with HMRC’s rules.

What does an umbrella company do?

If you do not wish to operate as a sole trader or set up a limited company then you can consider working for an umbrella company, or you can have your income processed as PAYE by your recruitment agency’s payroll system, though this does not give the additional benefits of working for an umbrella company.

The rates of pay for agency PAYE and umbrella companies will be different.  The Agency PAYE hourly pay rate will be lower as the recruitment agency will account for employment costs.  However, it’s important to be aware that an umbrella company will retain an income for providing employment services.  So, while your contract sum rate with an umbrella company may be higher, your take-home pay may be similar to that of agency PAYE.

Before you decide on your best working option, we provide detailed illustrations to help you work out which will suit you best.

What are the benefits of an umbrella company?

If you choose to work under agency PAYE then you will only be employed by the agency on the contracts you accept from them.  If you take on a role offered by another recruitment agency you will have to go through the process of moving your pay and tax details to the new recruitment agency, so there is an ongoing administrative burden each time you switch.

On the other hand, an umbrella company enables you to work on a series of temporary assignments without having to switch each time you take on a new role.

Umbrella employees receive employment benefits including:

  • sick pay
  • maternity/paternity pay
  • adoption leave
  • holiday pay
  • personal accident insurance
  • access to a company pension scheme.

One of the key benefits in using an umbrella company is that it allows you to maintain a record of continuous employment, even while you may switch between different assignments. This is particularly important when seeking mortgages and other loans.

The umbrella company will ensure you are fully compliant with HMRC rules, so will make the necessary pay packet deductions, such as income tax and National Insurance.

How do umbrella companies differ?

In theory, umbrella companies should provide the same services as they are all bound by the same employment laws and HMRC rules.  However, in reality there are differences in expertise, service quality and responsiveness.  We are also aware that some umbrella companies have a more relaxed approach to the business expenses they will allow contractors to process, though this leaves individuals (and the umbrella companies they work for) exposed.

Here at Crest Plus, we have built our business through providing first-class customer service. With more than 20 years’ experience as contractor accountants, having helped hundreds of thousands of people to contract successfully, we have the knowledge, expertise and experience required to serve people well and to ensure they work compliantly.  Compliance with HMRC’s rules on tax and business expenses are complex and can be a big headache to contractors as non-compliance can result in heavy penalties.

The Umbrella Plus difference

Crucially, our approach helps contractors to:

  • Get up and running within hours so that they can begin work without delay
  • Work in a fully compliant manner, with all taxes and other deductions made correctly and on time
  • Correctly apply HMRC’s rules relating to business expenses, ensuring full compliance
  • Receive a tailored service and personal attention

While there is no formal regulator for umbrella companies, Crest Plus is an associate member of FCSA.

What to do next

If you would like to discuss your working options as a contractor, or join Umbrella Plus, please get in touch on 01244 684700.

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