How to change umbrella companies – quick guide for contractors

change umbrella companies

You may decide to change umbrella companies at some point. 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 inaccurate or have not been made on time.
  • The fees might be too high for your liking.
  • You have concerns over the umbrella’s compliance with UK tax laws.
  • You suspect your current provider has been ‘salary skimming’ some of your pay or withholding holiday pay.
  • Sometimes, you might be forced to change umbrellas if you take on a new contract and your agency insists you use a provider on their Preferred Supplier List (PSL).

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

Choosing a new umbrella company

Before you change providers, you should carefully research other umbrella offerings on the market.

Important factors in your decision are usually the same as those that led you to make the switch in the first place!

Things to consider include

  • The umbrella company’s fee (margin).
  • Are there any hidden costs?
  • What’s the customer service like?
  • What’s the umbrella’s reputation like?
  • How do payments work?
  • Any recommendations from existing clients?
  • What are online reviews like?
  • How can the provider demonstrate compliance with UK tax laws?

Read our popular guide to choosing the best PAYE umbrella scheme for more details, and take a look at our growing list of 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 regularly, so this shouldn’t cause any problems.

Depending on the terms of your original agreement, you may have to pay an exit fee. However, this is increasingly rare, particularly amongst the big players in the market.

You may also have to provide a certain notice period before leaving.

Join your new umbrella company

You will need to follow several steps when joining a new umbrella scheme.

Alongside an identity check and providing your personal details, you will need to forward your P45 (or P46 for now) to the new scheme so that they can set you up on the payroll.

You must also prove you have the right to work in the UK.

If you change umbrella companies mid-contract, new contracts will need to be signed between your new umbrella company and your agent (or end client if working directly).

You shouldn’t have too many problems with your agency drafting a fresh contract with your new umbrella company, but you may need to explain the situation in more detail if you are working directly for an end client.

Potential pitfalls

When you change umbrella companies, it may take some time for the status of your invoices and expenses to be reconciled. This is especially the case if you are changing mid-contract.

You will need to keep in touch with past and current umbrella companies to ensure that your details and funds are transferred as quickly and accurately as possible.

Ideally, you should avoid changing umbrella companies between roles. This will avoid having a new contract drafted between the umbrella company and recruitment agency (or end-client if working directly).

You are also more likely to avoid the administrative lag mentioned above as your paperwork is transferred from one umbrella to another.

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