We've compiled a list of ten specific questions to ask. As all Umbrella Companies use the same payroll calculation, the main difference from one Umbrella to the next is the admin fee (the price they charge to process your payroll) and standard of customer service. Remember it's your money at stake, so you can't put a price on proper research.
1. Are CHAPS payments free?
Some Umbrella Companies will absorb the cost
of same day CHAPs payments, others will charge up to £20 for this
additional service. The amount charged generally reflects the fee
incurred by your umbrella company.
2. Is your weekly fee fixed or will it be a percentage of my earnings?
To protect the amount you pay to the Umbrella Company chose a company which
offers a fixed fee. Therefore, if your rate goes up you will not be
paying any more in administration fees.
3. Will I have my own dedicated account manager?
A good Umbrella Company will assign you an
account manager who will be your single point of contact for any
4. Will there be an additional cost for processing expenses?
Some Umbrella Companies make an additional
charge for processing expenses.
5. What insurances are included?
The mandatory insurances are Employers Liability, and Public
Liability. The majority of Umbrella Companies also include Professional Indemnity Insurance (PII) as
part of their fees. PII covers against the legal costs and claims
for compensation if you make a mistake or are found to be negligent
e.g. loss of documents. There is normally an additional
charge for Personal Accident Insurance (PAI). This
covers the contractor for accidental death or disablement in the
course of performing their duties.
6. Do you offer a child care vouchers scheme?
Childcare Vouchers are a flexible way to meet
the costs of your childcare. Part of your wages is sacrificed in
exchange for Childcare Vouchers. You can set aside up to £56 per
week in Childcare Vouchers. These vouchers are non-taxable and
exempt from Employee and Employer National Insurance contributions.
The Childcare Vouchers received are then exchanged, in whole or in
part, for the childcare services you use. Check with you
Umbrella Company whether they offer Childcare Vouchers.
7. Do you offer a stakeholder pension scheme?
If you don't currently have a pension set up or don't currently
make full use of the allowances available to you, you could be
paying substantial amounts of tax unnecessarily. Many Umbrella
Companies have the facility to make contributions into a
stakeholder pension scheme. You can save a substantial
amount in tax by using this facility. The amount of tax relief can
be as much as 48%, meaning that for every £100 invested you only
pay £52 and the tax man pays the rest. As well as saving on the
Income Tax that would ordinarily be payable, you also avoid the
employers and employees National Insurance contributions (NICs)
8. Is there a setup or cancellation fee?
There is not normally a setup or cancellation
9. Do I pay the admin fee when I'm not working?
Common practise is not to charge you when you
are not working, however it is worth checking theses details with
your Umbrella Company before you start your contract.
10. What expenses can I claim working through an Umbrella Company?
Using the services of an Umbrella Company allows you to claim expenses which a PAYE employee at the agency would not be entitled to. This is due to the over-arching employment contract with your Umbrella Company which deems your home to be your permanent work place and the clients place of work your temporary work place. You are therefore able to claim travel expenses to and from your temporary work place.
By claiming all the appropriate allowances and exemptions you can minimise your tax bill however, this is not a way of avoiding paying tax. The rule for claiming expenses is "that an employee or office holder may deduct expenses incurred wholly, exclusively and necessarily in performing their duties", you must be able to prove that the expenses you claim relate to your current contract.