Umbrella Fees & Rates
Umbrella company fees can vary quite dramatically, so it pays to shop around. Here’s a round-up of the various costs, rates of pay and other important things you need to think about when selecting the right umbrella company for your business.
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Things to look for when choosing an umbrella company
How often will I get paid?
When you’re looking at prospective umbrella companies, the first thing to find out is how often you’ll be paid and how. Most umbrella companies pay their employees either weekly or monthly. This can be done via BACs (Bankers Automated Clearing Services), which will take 3-5 working days or even FPS (Faster Payment Services) which means that your wages will be in your account on the same day that you’re paid. Make sure you won’t be charged as free, same-day payment is increasingly the industry standard.
How much does an umbrella company charge?
An umbrella company fees comparison will quickly reveal that companies tend to charge between £25 and £30 a week, but if they charge monthly, the variation is more broad, with an estimated spread between £80 to £130.
What does it mean when umbrella companies say that they’re free of charge?
Umbrella companies that don’t charge you a fee do so for a variety of different reasons – maybe they’re making a temporary loss in order to increase market share, utilising cross-subsidisation or using VAT schemes to repair their margins. As with anything that sounds too good to be true, there is often an element of risk when going with an umbrella company of this type. They may also charge you for extra services, so make sure that what they’re offering works for you.
Is the umbrella company fee applied to your gross or net earnings?
You’ll be paid with a PAYE (pay as you earn) structure, so you’ll be taxed and pay national insurance each time you receive your wages. You’ll also have to pay the umbrella company fee. Find out if it’s applied to your gross or net earnings (that is to say, before or after tax has been taken) and that you’re not paying for additional services that don’t apply to your particular industry.
Will the fee be fixed or a percentage of your earnings?
The way you’re charged is important because it can be the difference between a cheap umbrella company and the source of substantive personal expense. If you’re early on in your contracting career and not earning very much, then paying a percentage of your rate is not such a bad deal, but as your earnings rise, so does the price you pay.
What else is included in the umbrella company’s fee?
Some umbrella companies charge for services that you may not need. These can include expenses processing, tax form submission (like the P11D form, a financial end of year report) and insurance.
Is the fee applied no matter what your working status?
It’s important to find out if the umbrella company charges you its weekly/monthly fee even if you’re not working for a period of time. If they do have a policy that means you’ll be charged regardless of your working status, this could become a source of considerable expense if you fall ill or decide to take a sabbatical.
What documentation should you receive when you join an umbrella company?
Ideally, when you join up with an umbrella company, you should receive a letter of engagement that briefs you as to the nature of your employment and answers any questions you might have. You should certainly receive a contract of employment – one of the main reasons to join an umbrella company is that it offers contractors all the protections and rights afforded to an employee such as sick pay, maternity/paternity leave and holiday pay.
What should my employment contract say?
Umbrella company rates of pay will, of course, vary depending on what industry you’re in but your contract should also guarantee you at least 336 hours of paid work per year, paid at the national minimum wage. This total should also be exclusive of expenses. The contract should also stipulate that in the event of the end-user client reneging on their payment, the umbrella company will pay you regardless.
Is there a support structure in place, such as a functioning HR department?
As your employer, a umbrella company has a duty of care towards you. A responsive HR that is available to deal with any problems is an important factor to consider when choosing an umbrella company. A good umbrella company will also have a written service guarantee that will tell you exactly what you can expect from them and will give you recourse if you feel certain duties have not been fulfilled.
Will I have to pay a fee if I leave my umbrella company?
It’s important to realise that you can’t treat your umbrella company like a client as they are your employer, with all that this implies. This means that you have to give and work your notice, just as you would for any employed job. It may also be the case that you have to pay a penalty if you leave before your agreed end point.
If you want to leave your umbrella company in the middle of working for a client, this could put them in breach of contract with that client and leave you open to charges of gross misconduct. To avoid any difficulties, make sure you know the exact nature of the contract you’re signing before you commit yourself.
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