How to Switch Umbrella Companies

How to Switch Umbrella Companies


If you’re considering switching umbrella companies, you’re not alone. Many contractors choose to make the switch for various reasons. To learn more about why contractors decide to switch, how to make the transition, and what to consider when selecting a new umbrella company, check out our latest article.

Why switch umbrella companies?

There are numerous factors that may prompt you to consider changing your current provider. We’ve highlighted some of the most common reasons that contractors decide to make the switch.

1) Misleading take home pay illustrations

Prior to signing up with your current company, you may have requested take-home pay illustrations to compare your net income across different providers. However, some less-than-honest umbrella companies will manipulate the figures in these illustrations to make their service seem more financially attractive than it really is.

It’s important to remember that all compliant umbrella companies have to make the same tax deductions as set out by HMRC. To avoid being taken in by unethical companies, it’s crucial to understand how a take-home pay illustration works and to be able to spot any misleading claims. If the first payment you receive from an umbrella company is drastically different from the illustration they provided, it’s possible that they have not given you an accurate calculation.

2) Poor customer service

Another reason why you might be considering switching umbrella companies is if you’ve experienced bad customer service. Have you found that your current provider doesn’t offer the support you need, or that it takes too long to get a response when you have a query or concern? Have you received inaccurate or late payments, with no satisfactory resolution when you raised the issue?

If so, it’s worth remembering that there are plenty of other umbrella companies out there such as that can better meet your needs.

3) An overpriced margin

Another factor that may prompt you to switch umbrella companies is the suspicion that you’re being charged an overpriced margin for the services you’re receiving. While most compliant companies will only take a margin that reflects the cost of their services, there can still be significant variation in the amount that different providers charge. Typically, umbrella companies will advertise a margin of between £15 and £35 per week.

If you’re finding that your current provider’s margin is too high, it’s worth shopping around to see if you can find a better deal elsewhere. However, it’s also important to consider the level of customer service you’re likely to receive. While one company might be cheaper than another, you might find that paying a little more is worth it if it provides you with exceptional customer support.

4) Additional service requirements

While umbrella companies primarily exist to help contractors work compliantly on assignments that are deemed inside IR35, not all providers offer the same level of services beyond the basic statutory benefits. If you require additional services, such as salary sacrifice or specialized insurances, it’s essential to check whether your chosen umbrella company can accommodate these requirements before registering with them.

Changing umbrella companies because of a recruitment agency PSL

In case you decide to switch recruitment agencies, you might receive a list of suggested umbrella companies from your new agency, which could be labeled as a Preferred Supplier List (PSL) or Approved Supplier List (ASL). However, it’s crucial to understand that these lists are recommendations, and your recruitment agency cannot legally oblige or dictate which company you must use for your payroll.

As long as your chosen umbrella company can demonstrate that they operate lawfully and in compliance with relevant regulations and tax laws, there’s no valid reason why a recruitment agency should deny your request to use a provider that’s not on their PSL or ASL.

It’s worth noting that in some cases, your new recruitment agency may have valid reasons for not wanting to work with a particular umbrella company. They may be doing so to protect their temporary workers and ensure that they’re working with reputable and compliant providers. For instance, many agencies only include umbrella companies that have achieved certification from the Freelancer and Contractor Services Association (FCSA) on their PSL or ASL.

Whether you’ve received a list of suggested umbrella companies from your agency or have been asked to find one on your own, it’s crucial to do your due diligence and ensure that you’re using a credible and legitimate provider.

Inform your current provider about your intention to abandon their services

When switching to a new umbrella company, your first important step is to inform your current provider (in writing) that you no longer require their services and request your P45. Neglecting to do so may cause you to be overtaxed, as HMRC may consider you to have two employers – your previous and new umbrella companies. Additionally, it is crucial to notify your recruitment agency of your intention to switch umbrella companies and ensure that they sign an overarching agreement with your new provider and exchange payroll information.

Registering with your new umbrella company

When registering with a new umbrella company, there are several steps you need to follow. These include providing the company with your personal details as well as information about your contract, such as its details, the name of your recruitment agency or end client, and their contact information.

Once you have received your P45, it is important to send a copy to your new umbrella company as soon as possible. However, if you have not received it yet but are due to start a new assignment, you can still begin by completing a Starter Checklist for PAYE and provide your P45 later.
In addition to providing your P45 or completing a Starter Checklist, you will also need to provide proof of your identity and right to work in the UK. Furthermore, you will be required to read and sign the umbrella company’s employment contract.

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