10 questions to ask when choosing an umbrella company

Looking for an umbrella company can be a daunting task. But having 10 must-ask questions up your sleeve can really help identify which umbrella is going to be the best for you, writes Lucy Smith, managing director of Clarity Umbrella.

From Google and beyond…

Before we get to these 10 questions to ask when choosing an umbrella company, you are most likely to start looking for an umbrella using Google Web Search. You will quickly see reviews that are ‘mixed’ -- to say the least!

One obvious but often overlooked fact to keep in mind here -- the bigger the umbrella company, the greater the likelihood of negative reviews. But also remember; the bigger the umbrella, the bigger the opportunity for many more contractors to share their experiences.

The PSL issue

What next? Well, I speak with many contractors daily and even in circumstances where they come up against a recruitment agency that is stipulating use of their preferred umbrella (on their preferred supplier list), and we are asked our opinion, we always say the same thing. Pick up the phone!

Give the umbrella a call and see if they give you confidence in what they are offering. After all, the umbrella company will be handling your money, so there has to be some trust and confidence placed in the business you choose.

Top 10 questions to ask when choosing an umbrella company

So once on that call with the umbrella company, or even on an email, what are the 10 questions that you as a contractor should really be asking to see if the brolly is worth their salt?

1. Will my recruitment agency work with you?

First and foremost, always check with the agency to ensure you are not restricted in who you can work with. There is nothing worse than doing all your checks, only to then be told that you cannot work with your chosen umbrella company.

2. Can you give me a walkthrough?

Ask the brolly to take you through the key steps. Even if you have worked via a brolly before, it is always worth asking this new brolly for a brief overview of what is expected from you; down to timesheet submissions, how often payroll is run, and if you ignored question one (above), whether they have a relationship with your agency or not.

3. Do you have a breakdown please of my take-home pay?

Always ask for a copy of your take-home. But go in prepared with the knowledge of your day rate or hourly rate, and whether the agency is requesting weekly or monthly invoices, and then make sure you are getting like-for-like comparisons. We see so many differing take-home pays, notably when monthly payments are calculated on 20 days / 22 days.

We also see many brollies inflate take-home by not showing any impact on the earnings / tax code if your annualised earnings are greater than £100,000.

Again, ask if you are unsure, and see if their responses fill you with confidence.

Be sure to let them know if you have any other income, or earnings which may impact on the take-home on the brolly side.

4. Can I stick with you Steve?

Check to see if you will have a specific point of contact, and request this as a priority. We hear contractors complaining all the time that when there is an issue, they seem to be unable to reach anyone who can either give a clear answer or help resolve the problem quickly.

5. How do you explain the take-home percentage?

If you do your ‘due diligence’ properly, and something around the take-home pay looks off, definitely do enquire why the take-home is (typically) so high.

N.B. Any compliant umbrella is unable to provide a take-home that, say, for a 40%  taxpayer is any higher than between 52 and 58% of the day rate.

If an umbrella business is offering a take-home that is too good to be true, there are some additional questions you might like to pose:

  • Where is the business registered?
  • How long has the business been trading for?
  • Who are the directors?

And then quietly, on your own after the call or email, check to see if those directors are linked to any known avoidance schemes.

Finally, as a small heads-up for contractors in wake of the ongoing cloning of brollies for fraud purposes, also check the validity of the emails.

Are there any typos in the email address, or differing email suffixes to the actual company name? If there are such anomalies with the letters, you could very well be dealing with a clone, who you’ll want to de-engage from immediately and provide none of your details to.

6. What does the margin look like, and cover?

Tread carefully here but do always check the umbrella’s margin and see if there are any extra charges that are not covered by that figure.

Please note, I would not encourage anyone to register with an umbrella company based purely on cost. Remember, running a compliant umbrella is not a cheap business, so just proceed with caution if there is an addition or two outside of their margin.

7. Who’s the pension with?

Checking to see who their employer pension scheme is with is important. The answer may not suit some contractors, so it’s always useful to ask this upfront.

8. What happens if I am unhappy with your service?

You’ll need to know what to do, or who to contact, if things with your new umbrella go awry.

Related, or instead of this question if you’re already been told Steve will indeed be your first port of call if you’re unhappy, ask:

  • What is the notice period?
  • Are there any exit fees?

9. Is insurance included?

Definitely enquire if your insurances are included within the margin quoted. We often still see companies charging extra for the insurances that should be covered!

10. What’s your story?

And last but not least; ask for a bit of background on the business!

Setting up and running an umbrella (properly) involves a little more legwork than most people think! The best brollies have a good understanding of employment law, tax legislation, accounting/expenses issues and the like. Is your brolly on top of, and going to be on top of, the very latest HMRC requirements on all parties in the chain?

Very finally, recommendations from other contractors -- who you trust -- are almost always best. Nothing is ever better when it comes to choosing an umbrella company than a recommendation from the horse’s mouth. Nothing apart from these ten questions to help you through the process of course! Joking aside, when you do receive a personal recommendation about an umbrella company, you then have the unique peace of mind that the vouching is genuine; and that’s something one can never guarantee from other sources. Good luck contractors!

Tuesday 14th Jun 2022
Profile picture for user Lucy Smith

Written by Lucy Smith

Lucy has over 9 years extensive experience in the umbrella market, much of this time spent managing one of the most reputable umbrella companies in the market and now, Clarity Umbrella.
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