Choosing which Umbrella company to partner with is no different to purchasing a car. You go to a reputable dealer (Umbrella provider), you find the car (product) that meets your exact requirements, and you check the vehicle's full service history (experience and proven track-record) before handing over your hard-earned cash. So why do so many recruiters continue to invest – yes it is an investment – in Umbrella companies who would fail their own industry MOT?
Here are the top 3 things recruiters must be wary of when seeking the right Umbrella to entrust their business with.
1. Do your homework
Anyone can call themselves an Umbrella company, just as anyone could call themselves a recruitment agency. The only way you will be able to determine the difference between a cowboy and a bona fide provider is by conducting your own research. So,do some digging around on different Umbrella providers by speaking with people you already know.
For instance, ask those within your network of industry contacts who they use, their experiences and who to avoid! And don't forget to speak with the contractors you already have relationships with, ask for their feedback and experiences of working with different Umbrella companies – who do they recommend?
Third-party endorsement about a company can help make your decision-making process all the more easy, but you also need to dig a little deeper to unearth the potential partner that is right for you. Research the company online, find out about the people you will be dealing with and check out their backgrounds and experience within the industry (LinkedIn is a great resource to help you do this). And find out what industry associations they comply with – are they active members of All Umbrella Companies Are Equal, for instance, as One Click Umbrella are.
2. Make sure they are UK based
There are a number of Umbrella's who claim to be based in the UK but are actually based offshore. Whilst this may at first glance not seem to be such an issue, the reality is that those companies operating offshore do so in a bid to avoid paying tax in the UK.
Essentially, these offshore organisations have historically exploited the loophole which currently exists whereby a UK-based contractor is technically 'employed' by a company based overseas. By duping the Government, recruiters and contractors do not fall under the remit of UK tax laws, and as such are not accountable for paying PAYE tax and National Insurance Contributions (NIC). But this is not only unethical; it is now against the law.
Any Umbrella provider offering a 'tax avoidance' payment model should signal a very large red flag for recruiters – it is an illegal practice and any recruiter partnering with such a firm could find themselves feeling the full force of HMRC.
Indeed, such is the extent of the problem that 'offshoring' costs the Treasury some £100 million in lost earnings each year, so it comes as no surprise that the Government is now attempting to take a tough stance against such practices.
By using an offshore Umbrella to manage the payroll of your workers, there is the suggestion that the transfer of funds to your 'recommended' offshore supplier under a PSL or ASL agreement is bordering on 'money laundering' - the consequences of which could be severe. So make sure you and your business is protected and only partner with a mainland UK-based Umbrella company such as One Click (and for the record, we're based in Warrington!).
3. Make sure they are compliant
The UK has some of the tightest legislation in Europe which, some would argue, changes at a rate of knots. But the ability to keep up with the pace of change is critical – failure to do so could see some recruiters finding themselves in breach of the law. This is perhaps the most critical factor that must be considered when appointing your new Umbrella Company – do they understand the law and adhere to it?
Over the last 12 months, there have been a number of notable changes to employment law in addition to a significant number of landmark cases too – all of which could impact on how recruiters operate their businesses.
For instance, over the last few months alone we have seen the Travel & Subsistence Review and the well-documented Reed Tax Tribunal. And just last month it was reported that a great many recruiters are still struggling to understand the ramifications of IR35 on their agencies – even after three years since its introduction.
So when identifying the best Umbrella to partner with, make sure they are not only compliant themselves but that they also have a good handle on what the latest trends and developments are too. After all, your relationship will become one of 'partnership' and it will be their job to ensure that both their and your businesses are fully compliant in addition to being best-placed to anticipate future changes to the law and help you to prepare for them too.
At One Click Umbrella we provide fully compliant solutions for your business. We ensure that all your temporary workers are paid at or above the national minimum wage after deductions and we fully support the Government's drive to eradicate our industry of unscrupulous Umbrella providers.
There are a number of Umbrella companies, including One Click Umbrella, who can provide you with a great service that will save you time and enable you to focus on growing your business. But fundamentally, the one you choose to entrust will be the one who has your best interests at heart and is as committed to your business as you are.