Tips on Choosing an Umbrella Company

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It may seem like there are thousands of umbrella companies out there: Parasol, ContractorUmbrella, Giant Strongbox, Liberty Bishop, Orange Genie, Atlantic Umbrella, Crystal umbrella, Danbro, Plan IT, Tarpon, Bedouin, Churchill Knight. . . to name just a few.

The best advice we can give before choosing a company is, and it may seem obvious but you’d be surprised at the number of contractors who don’t, is. . . do your research. All companies are going to say they are the best and have outstanding service, what else could they possibly say? Some may even be recommended by recruitment agencies – it’s worth mentioning that some agencies do receive referral commissions for recommending certain companies which may affect why and who they recommend. Choosing an umbrella company is an important decision so why not try Googling them or search for posts on forum websites, you could also ask other contractors and colleagues. Our advice is, have a good hunt around, there are good companies out there.

Find below SJD’s Top 7 tips on choosing an umbrella company:

1. Steer clear of umbrella companies that have: entry fees, exit fees or minimum term commitments with penalties for leaving early.

2. Avoid companies that link their fees to your rate; these can be expensive as your fees increase in line with rate increases. Umbrella companies like this often have complex fee structures that are in some way linked to contract values – why should you pay more just because you earn more? It’s not like the umbrella company has to do anymore work. Clearly advertised, fixed fee structures are best.

3. Don’t touch umbrella companies that tell you it is ok to claim expenses without receipts – in the event of an investigation by HM Revenue and Customs they would be disallowed and you would be liable for all the tax owing.

4. Look for an established umbrella company – this may seem obvious but a number of umbrella companies have sprung up recently and if they fold or go into administration, they will take your money with them, leaving you out of pocket.

5. It is often difficult to tell an ethical or honest umbrella company just from their website or brief telephone conversation. Generally speaking, if they are promising expense claims with ‘No Receipts’ and larger than what seems reasonable or possible take home pay, they are best avoided. All umbrella companies operate under the same HM Revenue and Customs regulations.

6. Are they compliant? Have they been reviewed or audited externally? This is becoming increasingly common. Of course an umbrella company will advise you they are compliant, they are hardly likely to tell you otherwise. Ask what their marketing claims are based on and remember it is you who HMRC will investigate and not your umbrella company.

7. Finally the personal touch, yes fully automated and online only umbrella companies are cheaper, but you will most definitely need to speak to a human being at some point, especially if you are new to contracting. Do a test call and ask a few questions – will you have a dedicated account manager? Do they have service level agreements? Or will you be pushed from pillar to post speaking to 20 different people having to explain who and what you want 20 different times.

We hope you have found these tips useful.

If you would like to know more about Parasol or working through an umbrella company visit Parasol’s site or contact a member of their team on 0800 634 7526 or email

Alternatively, if you have any questions about contracting through your own limited we’d be delighted to help.

Click on the links below to read our other umbrella guides:

SJD Accountancy provides Umbrella Company Services to contractors and freelancers through our sister company, Parasol.

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