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Viewing How to Choose an Umbrella Company from 4 Basics of an Umbrella Company - Umbrella Company - The Basics Written by Contractor Supermarket

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How to Choose an Umbrella Company

ContractorSupermarket talks to Bytestart about how to go about choosing an umbrella company. Bytestart is the fastest growing and one of the most popular small business sites in the UK with over 145,000 unique visitors in January 2009 alone. Independently run and operated by online specialists, Bytestart provide no-nonsense guides, articles and tips for start ups and existing small companies.

Aside from limited companies, the umbrella company is the second most popular business structure used by contractors and freelancers.

The last decade has seen the emergence of hundreds of new umbrella schemes, so it may seem a difficult task to select the right one for your business. Here are some tips on what to look out for when joining an umbrella company.

Umbrella companies - what to look out for

1. Fees

A reputable firm will have a transparent fee structure, typically split between weekly or monthly billing. Some companies charge a percentage of your invoice value, which can become very expensive if you're a high earner.

2. Existing Clients

How many existing freelancer / contractor clients does the umbrella company have, and are you able to view testimonials from any of them. Also, how long has the scheme been running for?

3. Agencies

Many of the leading umbrella companies are 'preferred suppliers' to recruitment agencies, so chances are you may encouraged to join a select number of schemes. You are under no obligation to do so, and make sure you do your homework on any umbrella companies you are contemplating signing up to.

4. Insurance

Most umbrella companies will offer public liability, employers' liability, and professional indemnity insurance cover as standard.

5. Marketing Chat

Watch our for phrases such as

"We're IR35 compliant"

"HMRC approved"

in the marketing material issued by some umbrella companies. All umbrella schemes are taxed the same way, there are no exceptions to this rule.

6. Extra Costs

Beware of schemes which charge sneaky entry and exit fees, or similar additional costs. Make sure you receive a full list of charges before signing up.

7. Online

Given the widespread use of the web, you should seek a web-enabled umbrella scheme for ease of use. Everything from timesheet submission to claiming expenses can all be completed online these days.

8. Customer Service

For many contractors, good service is top of the list when it comes to choosing business services. You should get a 'feeling' about any schemes you contact, and you will find that many now offer money back guarantees and agreed response times to queries.

9. Switching

If you encounter problems with your current umbrella scheme operator, it isn't that difficult to change schemes, as most major schemes can easily handle the transient nature of contract workers.

10. Recommendations

By far the best way to select a good umbrella company is via recommendations from current contractor colleagues.

Marcus Glover, Managing Director of Springboard Umbrella Company, adds to this guide on choosing the right umbrella company, by reinforcing that the best way to judge an umbrella company is by listening to what existing clients have to say about the service:

"Don't be taken in by an umbrella company's website and marketing speak - of course they'll say they are the best!

"Contractors will get a truer idea of what an umbrella company is really like, by how a company's existing clients judge them. Take five minutes to see how one umbrella company compares against all the others.

"See how an umbrella company ranks on things like customer feedback and expert opinion. It'll be the best five minutes you've ever spent!"