There are several steps to complete when registering with an umbrella company. Here, we explain how each step in the process works and what to look out for.
We also explain what to do if you want to switch providers.
When you have identified a handful of umbrella companies you’d like to know more about, ask them for a tailored take-home pay calculation.
This is a good opportunity to see your earning potential and if the umbrella companies are dependable or unscrupulous.
All compliant umbrella companies should process your payroll in the same way.
They all operate Pay As You Earn (PAYE) – HMRC’s tax system. Therefore, if you choose two umbrellas with the same margin – £20 per week, for example – they should also quote an identical take-home pay amount.
However, a few umbrellas have been known to manipulate their calculations, to present an inflated take-home figure. It’s only natural that you would be drawn to the umbrella that’s offering you the highest pay retention, but don’t be fooled!
If you see an unusually optimistic projection, challenge the umbrella company and see how they justify it.
Accurate projections consider the following; your tax code, hours per week/month, rate of pay, student loan deductions, pension contributions, and the umbrella margin.
Start the registration process
Once you have identified the right umbrella company – take a moment to give them one final review. Are they compliant? Do they have good feedback and a stellar reputation? How long have they been operating? Is the margin competitive? Have they made you feel comfortable and explained everything thoroughly?
Assuming you’re happy to go ahead, here is what you should do:
Contact the umbrella’s sales team and let them know you want to join. Alternatively, you can send the umbrella an email or contact them via the site to request a call at a convenient time.
Perhaps you will want to run through another pay calculation before giving the umbrella company the green light.
Provide the umbrella with your personal information. This is required by law and will include your full name, address, date of birth, nationality, bank details, assignment details, details about your agency/end-hirer, and more.
In many cases, you’ll need to acknowledge a disclaimer explaining some of the umbrella company’s policies. Read this carefully.
Provide your personal information / ID
Before an umbrella company can officially register you as a new employee, they must have proof of your ID (drivers’ licence, passport, visa, etc.)
You should be fine to send a photograph of your document(s), assuming the quality is high and no corners are cut out.
The umbrella will also ask you for your P45.
If you have it – great. Send it across, and the umbrella will ensure you’re put on the correct tax code.
However, if you don’t have a P45 – don’t worry.
Instead, you need to submit a New Worker Checklist – this is a short, easy-to-complete government document.
Your umbrella will help you do this. However, you must complete this form as early as possible as failure to submit it before your first payday could result in you paying tax at the emergency tax code.
Be aware of the background processes
Most contractors join an umbrella company after securing a contract via a recruitment agency. If this scenario applies, the umbrella and agency must sign an overarching contract that allows your funds to be passed down the supply chain.
Although it’s unlikely, every so often inefficiency in the supply chain can result in delayed payment, even when the worker has successfully completed the umbrella company registration process.
Therefore, make sure you keep in touch with your agency, and don’t be afraid to chase them if you have any concerns.
Review the umbrella company’s contract of employment and sign if you are happy
The last piece of the umbrella registration process is the umbrella company’s employment contract.
It’s imperative you read this thoroughly and are entirely happy before you sign and return it.
Most modern umbrella companies will allow you to sign and submit the employment contract online.
When you sign and return the employment contract, you officially become an employee of the umbrella company.
This is the final step in the umbrella company registration process.
The remaining processes to ensure you’re paid on time
Now that you’ve joined an umbrella, make sure you’re familiar with the processes involved that’ll ensure you’re paid on time.
For example, check the timesheet submission process because you won’t be paid when you expect to be without submitting timesheets.
Most umbrellas operate in the same way (or very similar) but make sure you know what you need to do from the beginning to avoid unpleasant surprises down the line.
Switch umbrella if you’re not happy with the service
Switching umbrella companies may sound like a stressful concept, but it’s worth it if you’re not receiving a good level of service.
Although it may take you a while to switch, it could save you time, money and reduce your stress levels.
If you’re unhappy with the current umbrella provider, tell them that you want to leave and request your P45.
Contact the new umbrella you wish to join, and they’ll guide you through the registration process again (as detailed in this article).
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.
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!
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 Starter Checklist) 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.
