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Questions to ask your Umbrella Company

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With so many different Umbrella Companies to choose from, you should be asking the right questions when shopping around for a new provider.

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 queries.

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 fee.

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.

Further reading

What freelance contractors should know about umbrella companies
Contractors beware - not all umbrella companies are the same!

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