| Contractors rely on their umbrella companies to | | | | joining letter, then you should request it. If the |
| ensure that all their tax liabilities are calculated | | | | umbrella fails to deliver, it is not a legitimate |
| correctly and the right amounts of income tax | | | | employer. |
| and National Insurance Contributions are paid to | | | | 3: Ask for the expenses policy |
| HMRC on time. | | | | You should carefully check your umbrella's |
| And because contractors take guidance from | | | | expenses policy. Examine what the policy states |
| umbrella companies about what expenses they | | | | you can claim and compare it to allowable |
| can legitimately claim back and offset against their | | | | business expenses on HMRC's website. If the |
| tax bill, it is essential that the service company is | | | | policy says HMRC dispensations mean you do not |
| compliant. | | | | have to retain receipts, then the umbrella is not |
| But how can you check if your umbrella company | | | | operating compliantly. A dispensation merely |
| is complaint? Here are five key checks to make | | | | means that the umbrella companies are not |
| sure umbrella companies are compliant: | | | | required to complete a P11D for each employee. |
| 1: Investigate the umbrella's background | | | | 4: Speak to the human resources department |
| Make sure the umbrella company is UK based and | | | | Umbrella companies with just a few hundred |
| has a good trading history. Buy a comprehensive | | | | contractor employees are, compared to most |
| credit report that highlights any bad debts. Look | | | | other UK employers, large employers. They |
| at contractor websites that review umbrella | | | | should have the professional resources needed to |
| companies and check contractor forums that can | | | | effectively employ large numbers of contractors. |
| indicate whether an umbrella is trading compliantly | | | | If the umbrella lacks a professional human |
| or not. Ask your fellow contractors who they've | | | | resource department or does not outsource this |
| used and search for news reports on the web - | | | | function to HR experts, then there is a reasonable |
| the umbrella may have been subjected to | | | | chance that it is not operating compliantly. |
| repeated investigations by HMRC. | | | | 5: Are you paid the minimum wage and holiday |
| 2: Check your contract of employment | | | | pay? |
| As an umbrella company contractor, you will | | | | It is a UK legal requirement to pay employees a |
| become an employee of the umbrella and should | | | | minimum wage and holiday pay, as well as other |
| expect to receive everything that comes with | | | | statutory benefits, such as sick pay and |
| being a full-time permanent employee. This | | | | maternity benefits. Umbrella companies that do |
| includes a formal contract of employment that | | | | not pay their contractor employees holiday pay, |
| provides you with the terms and conditions of | | | | usually by holding back a percentage of the |
| your employment, including a minimum of 336 | | | | contractors earnings, and do not pay the legal |
| hours per year paid at the legal minimum wage. If | | | | minimum wage (not including expenses) for at |
| you are not issued with a formal employment | | | | least 336 hours in a year are operating outside |
| contract, or only a set of terms and conditions or | | | | the law. |