Switching umbrella companies is a straightforward process, and providing you’re joining a reputable provider with streamlined processes in place, it won’t take long. However, are you better off putting up with the substandard service until you finish your current assignment, or are you better off moving mid-contract? Keep reading, and we’ll help you better understand your options.
Switching umbrella company mid-contract
The answer is yes – you can leave your existing umbrella company whenever you like and join another one. However, this is a lot of information to take on board first – before you decide to make the transfer. This blog will explain what you need to know about switching umbrella companies and provide pointers to help you make a well-informed decision regarding your payroll.
What do you need to do before you switch umbrella company?
If you are considering switching umbrella company, here are some things you need to know about the processes involved.
Inform your existing umbrella company
It may sound pretty obvious, but the first thing you need to do is inform your current umbrella company that you are leaving their service. They will then be able to run through the processes with you.
Request a P45
You must request a P45 document from our current umbrella company – as soon as you inform them that you’re leaving. You will need to give your P45 to your new umbrella company to ensure they set you up on their system with the correct tax code. Failure to do this may result in you being overtaxed and lower payments than you’re used to.
Keep your recruitment agency up to date
If you’re switching umbrella companies, be sure to keep your recruitment agency up to date because they will need to sign an overarching agreement with your newly chosen umbrella company. It’s a good idea to speak with your recruitment agency before committing to the services of an umbrella company. In some cases, you won’t be able to use an umbrella that your agency doesn’t approve of. On the other hand, most reputable recruitment agencies have a Preferred Supplier List (PSL) – a list of accredited umbrella companies that should provide you with a high-quality and compliant service.
Identify a new umbrella company
Before leaving your existing umbrella company, it makes sense to identify a new one to join. Do your research, carry out thorough due diligence and speak with your agency.
Choose a new umbrella company and explain your circumstances
When you’re ready to switch umbrella company and commit to a new provider, give them a call and discuss your circumstances. They’ll run through the registration process which should be very similar to your previous umbrella company – assuming they were compliant with UK tax law and HMRC’s rules and regulations.
Be prepared to read and sign a new Contract of Employment
When switching umbrella companies, you’ll be required to read and sign a new Contract of Employment. Like all contractors, be sure to read it thoroughly and only sign it if you’re entirely happy with its content. Please do not hesitate to raise any questions with the umbrella company before signing – if anything is unclear.
Potential issues if you decide to switch umbrella company
We use the phrase “issues” in the header, but we mean drawbacks. Assuming you’re unhappy with your current umbrella company because its performance is below par – switching to a new provider (assuming they’re compliant) is entirely worth it and shouldn’t be delayed.
Your new umbrella company may have a higher margin
Remember, the only thing that’ll vary between compliant umbrella companies and your take-home pay is the umbrella company margin they deduct. Therefore, if the umbrella company you’re leaving has a £15.00 per week margin and you switch to an umbrella with a £25.00 per week margin, you will notice a slight decrease in your take-home pay retention.
Administrative responsibilities
As outlined in the section above (switching umbrella company – what you need to do), there is quite a lot of administration to undertake. However, if your existing umbrella is that bad – you should move immediately, and the paperwork will be entirely worth it.
Hold ups within the supply chain
When switching umbrella companies, the process isn’t entirely in your hands. You need to rely on the supply chain to pull its weight, too – including your old umbrella, new umbrella and recruitment agency. For example, if your new agency takes a long time to complete paperwork, it could delay your payments. It is also worth noting that it could take a while for the umbrella company you’re leaving to issue a P45. You will need to share your P45 with your new umbrella to avoid being emergency taxed.
Worth noting
The following information is worth considering if you are looking to switch umbrella companies. The most important thing to remember is to ensure you join a compliant umbrella company. If you think your current umbrella is non-compliant, you could have an outstanding tax and National Insurance liability. If this is the case, you should contact HMRC to resolve the problem and report the non-compliant umbrella company.
Always pick a compliant umbrella company
With over 500 umbrella companies in the UK – you have plenty of choices. To make the decision easier, we highly recommend you only consider using an umbrella company accredited by either the Freelancer and Contractor Services Association (FCSA) or Professional Passport. Both of these professional bodies are dedicated to ensuring the supply chain of temporary workers is compliant with UK tax law. For a company to get an accreditation from one of these bodies, they must prove they’re compliant, and all processes are above board.
Read reviews of umbrella companies and conduct thorough due diligence
Before switching umbrella companies, have a look at online reviews. Only use an umbrella reviewed positively on the major feedback platforms, such as Google My Business and Trustpilot.
Don’t put up with a substandard umbrella company
It might be easier to wait until your current contract ends before switching umbrella companies. However, never stay with an umbrella if you suspect they’re non-compliant or the service is far below what it should be. Switching may be a little inconvenient, but it will undoubtedly be worth it.
Top 10 umbrella companies
If you’re using an umbrella company that isn’t delivering value for money, you should seriously consider switching to a better provider. To help you decide which umbrella company is best, we’ve collated a list of our top 10 umbrella companies, and they’re all accredited by either the Freelancer and Contractor Services Association (FCSA) or Professional Passport. Please have a look and see if any grab your attention – some have special offers at the moment.
