For many contractors, an umbrella company offers the perfect, most hassle free way to operate.
No IR35 stress, very little paperwork and the ability to claim expenses are just a few of the reasons a contractor may opt to work in this way.
All the positives aside, there are other, more specific things an independent worker must consider when choosing an umbrella company, and here are five of the most important.
- Do a background check
Before any documents are signed, a freelancer should conduct a little research into the background of a company. A quick Google search will often bring up any positive or negative reviews of a company.
Generally, contractor forums are a good place to find this kind of information. Here, a contractor can discover the opinions of other like-minded individuals, or start up a new thread in order to investigate the reputation of a firm.
It’s important to take this at face value, however, as it’s possible for a perfectly reputable company to have a few negative reviews.
- Expenses and pay
Find out what the situation is with claiming expenses and how often you can expect to get paid. It’s particularly important that a contractor scrutinised a company’s expenses policy, as some firms can promise unrealistic tax savings in relation to claiming expenses.
With regards to pay, an independent worker should make sure that there is a clear timeline in place with regards to payment.
- Check the contract offer
A contractor must ensure that they are under a full contract of employment with the umbrella company. If a contract does not meet this requirement it could make a contractor non compliant in the eyes of HM Revenue and Customs.
The umbrella company acts as an employer and as a result of this the contractor doesn’t have to deal with IR35 and will also gain access to the working rights that other permanent employees have.
- What do they offer?
Although most umbrella companies offer a service that is fundamentally the same, each one will vary in the amount that they offer in terms of contractor support.
For example, does the firm offer a personal business manager or support team? Is there a direct line available for contact? These are the types of services a contractor should look for in an umbrella company. When it comes to a person’s finances, it’s often reassuring to have direct access to a professional at the firm that is responsible for managing this aspect of a contractor’s life.
- Is an umbrella company the right decision?
Really, this should be your first big decision. However, once the steps above have been followed through, it can benefit a contractor to have a little recap over their reasons for choosing an umbrella company in the first place.
A contractor’s lifestyle in terms of professional goals, financial desires and family life should all be taken into account when making the final decision. A discussion with a qualified accountant may also be worthwhile, especially for those new to contracting.