Everything you need to know about FCSA accredited Umbrella Companies

Using an umbrella company is the easiest way to get paid for any contractor. However, some circumstances are even more suited to an umbrella company, such as: 

• Inside IR35 contract roles 
• New to contracting
• Rates at less than £15 per hour or £100 per day
• Assignments of three months or less
• Most public sector contracts (and from 6th April 2021, many private sector contracts)
• Circumstances where a contractor cannot be or does not want to be a limited company director

If we use the above example of a common supply chain, the recruitment agency will agree an assignment rate with the Umbrella Company via its contract for services. 

As with any normal employer, the Umbrella Company has certain costs to cover. These include employer’s National Insurance, holiday pay, apprenticeship levy and pension contributions. The umbrella also retains a small margin for the services it provides. It is important to note that the PAYE rate is the rate that should be discussed with the worker, all the additional costs will be added on top of that rate. 

As with any normal employee, statutory deductions would be taken from that pay rate depending on the tax band.

You should now have a good overview of what an Umbrella Company is, how they operate, calculate pay and the benefits are of working with a compliant company. Unfortunately, they aren’t all like this. 

There have always been non-compliant payroll providers on the market. Changes in legislation often creates opportunity for non-compliant firms to take advantage. That is exactly what happened in 2017 when the reform to the public sector off payroll working rules were implemented. Non-compliant indicates a wanton disregard for a suggested path to well-being but fails to acknowledge the mistrust, disruption and inaccessibility. 

You can find out how to spot non-compliant companies in the documents linked at the end of this blog.

Yes. Directors of the agency can be prosecuted under the Criminal Finance Act 2017 where they have been involved in a supply chain containing non-compliant providers operating in the manner described above. Therefore, many agencies like us will have an Approved Supplier List (ASL) of Umbrella Companies they trade with to ensure a compliant, safe supply chain.