One common question that some temporary workers have regarding umbrella companies is whether or not there is a tie-in period with their services. We’ll answer this question below. However, in short – no. There is not a tie-in period with an umbrella company, assuming they’re compliant. Keep reading to find out more.
When you join an umbrella company, you become an employee, and they become the employer. To get paid, you’ll need to submit the hours you’ve worked to the umbrella and your agency (in most cases), and your funds are passed down the chain. Your umbrella company will receive your gross funds from your agency/end-client and will make the appropriate deductions before paying you your net salary.
The only income that umbrella companies generate for themselves is the margin they deduct for processing employees’ payroll. Each time a contractor is paid, the umbrella company will deduct a margin (assignment rate). Therefore, if an employee is not paid one week (for whatever reason), the umbrella company margin doesn’t apply, and the worker will not be out of pocket.
Umbrella companies work in a “pay as you go” fashion. When you’re paid, you’ll see the umbrella company margin deducted from your gross pay. As such, there is no tie-in period when you use an umbrella company, and you will not face any hidden costs along the way. If you decide to work for four weeks, then take four weeks off – the umbrella margin will apply to the weeks you work. You can jump on and off umbrella company payroll as and when you please, without any financial consequences.
Some umbrella companies promote “no tie-in period” as a benefit of their service. This is fair enough, as it’s good information to have if you’re new to umbrella companies. However, it’s not a benefit as such because umbrella companies shouldn’t have a tie-in period in the first place.
If you want to leave an umbrella company, get in contact with them and request a P45. The umbrella should issue you with this quickly and then you’ll no longer be an employee of theirs.
Conclusion
Assuming they’re compliant with HMRC’s rules and regulations, there should not be a tie-in period with an umbrella company. You should be free to join and leave umbrella companies as you please – without having to worry about any unexpected financial penalties.
The only income umbrellas generate for themselves is the margin which is deducted from the assignment rate (gross). Therefore, you’ll only be responsible for an umbrella company’s margin if the umbrella pays you. If an umbrella does not pay you (you take two months off work, for example), no margin applies, and you won’t be tied into your umbrella. If you want to leave an umbrella and maybe switch to another provider, all you need to do is contact them and request a P45.
Top 10 umbrella companies
Are you interested in seeing our top 10 umbrella companies? They are all accredited by either the Freelancer & Contractor Services Association (FCSA) or Professional Passport, and some have special offers at the moment! Finding a reliable umbrella company has never been so easy – thanks to our top 10!
