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How to change contractor umbrella companies

Published on Jul 6, 2009 |

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You may decide that you want to change umbrella companies at some stage - we look at how the process works, and what to look out for.

Why change umbrella companies?

There are many reasons why you might want to change umbrella companies - you may feel that customer service has not been good enough, payments are not accurate or have not been made on-time, the umbrella company fees are too high for your liking, or any number of other reasons.

With hundreds of umbrella schemes operating in the UK at any one time, there will always be some poorly-run outfits, as well as a core number of highly regarded firms.

Choosing a new umbrella company

Before you make the move, you should carefully research other umbrella offerings on the market. Important factors in your decision include: the umbrella fee structure, payment frequency, hidden costs, customer service, reputation, and any recommendations you may have received from existing contractors.

Read our popular guide to choosing the best PAYE umbrella scheme for more details, and take a look at our growing list of contractor umbrella companies.

Giving notice to your umbrella company

The first step is to tell your current umbrella company that you no longer require their services. The umbrella market is very fluid, with clients coming and going on a regular basis, so this shouldn't cause any problems.

Depending on the terms of your original agreement, you may have to pay some kind of exit fee - but this is increasingly rare, particularly amongst the big players in the market. You may also have to provide a certain notice period before leaving.

Joining your new umbrella company

You will need to follow a number of steps when joining a new umbrella scheme. Alongside an identity check, and providing your personal details, you will need to forward on your P45 (or P46 for now) to the new scheme to enable them to set you up on the payroll.

If you have changed umbrella companies mid-contract, new contracts will need to be signed between your new umbrella company and your agent (or end-client if working direct). You shouldn't have too many problems with your agency drafting a fresh contract with your new umbrella company, but may need to explain the situation in more detail if you are working direct for an end-client.

For further details, read our guide to joining an umbrella company scheme.

Potential pitfalls

When changing umbrella companies, it may take some time before the status of your invoices and expenses are reconciled, especially if you are changing mid-contract. You will need to keep in touch with both past and current umbrella companies to ensure that the transfer of your details and funds is achieved as quickly and accurately as possible.

Ideally, you should try not to switch umbrella companies between roles, as this will avoid having to have a new contract drafted between the umbrella company and recruitment agency (or end-client if working direct). You are also more likely to avoid the administrative lag mentioned above as your paperwork is transferred from one umbrella to another.