03 May Choosing the right Umbrella Company
Your recruitment agency plays a vital part in the UK economy – linking employers to employees at a time of a national skills shortage within a candidate-driven market. Providing the best possible service to tempt those candidates into applying for your clients’ vacancies is, naturally, high on your list of priorities, and by offering them the best choice of umbrella companies you can elevate your offerings and give yourself a competitive advantage. Here we look at what you should be looking for in your umbrella partner.
Why use an umbrella company?
It’s thought that up to 600,000 contractors are employed by over 500 umbrella companies in the UK today. That’s almost 2% of the working population who are operating in sectors as diverse as hospitality, IT, health- and social-care, education and veterinary care. And as this flexible and agile method of working gains in popularity savvy recruiters can make a real difference to the financial health and security of their candidates by recommending only the very best umbrella companies.
A compliant and innovative umbrella company will offer your candidates:
- A simple and straightforward registration process
- Dedicated support team
- Technological resources
- Prompt payment
- Continuous employment record
- Full entitlement to UK statutory rights
- Auto-enrolment into pension scheme
But how do you know which umbrella companies will give your candidates the best possible service, at the right price, while staying within HMRC’s strict tax rules? Let’s take a look at some of the questions you might want to ask.
Are they compliant?
The single most important question to ask about any potential umbrella partner. Lack of compliance will not only affect your contractors, some of whom may be landed with additional tax burdens and face potential prosecutions, but also your own company. If you use a non-compliant umbrella company – one that promises ‘tax-efficient’ payment structures, uses ‘disguised remuneration’ schemes, split salary payments, payments via share ownership schemes or capital advances, or pay through an offshore structure – your recruitment agency may be liable for potential investigation by HMRC which could lead to financial penalties as well as a severe loss of reputation among future potential candidates whose trust is imperative in such a people-centric business. It’s really not worth the risk of being labelled a tax avoidance enabler. You can see HMRC’s very clear guidance here.
Are they HMRC approved?
If any umbrella companies claims to be ‘HMRC approved’ you should end your discussions with them then and there. HMRC does not ‘approve’ umbrella companies and any claims to the contrary are a red flag indicating potential legal and financial problems along the line both for you and your contractors.
What an umbrella can do is to ensure that they are fully compliant within the current tax and employment legislation and work to update their policies and procedures according to any new legislation which may affect recruiters or contractors. Their policies should cover things such as IR35 Legislation, Tax and National Insurance Contributions, Agency Worker Regulations, and Workplace Pension Contributions and they should be proud to acknowledge that fact.
Are they open and transparent?
Think about any potential issues you may have, or any pressing questions you’d like your potential umbrella company to answer. Do they have a dedicated team on hand to resolve these issues or answer the questions? Do they have an accessible website covering all the common FAQs that contractors may want answering? Can you contact them about registration or referral issues or about contracts, timesheets, invoices and payroll?
If an umbrella company is evasive, or reluctant to publish its contact details, or if its staff are vague or unhelpful when you call, it’s time to look elsewhere. The best umbrella companies have a number of ways to get in touch, and they’ll always have helpful, responsive staff to deal with your enquiries.
Here at i4 Services we endeavour to provide the best possible service for all our recruitment agencies and contractors alike. If you’d like to know more about the range of solutions we offer simply call us on 0800 084 3058 or fill in the contact form here.