I want to use an umbrella company, but my recruitment agency won't let me – what should I do?

When you accept a role inside IR35 as a temporary worker, you are often given two payroll options: agency PAYE or using an umbrella company. Many recruitment agencies will provide contractors with a Preferred Supplier List (PSL) of umbrella companies to choose from; however, you may research and find a provider you would like to use instead. We answer one of contractors’ most commonly asked questions: “I want to use an umbrella company, but my recruitment agency won’t let me – what should I do?”.

Why do recruitment agencies prefer you to use umbrella companies on their Preferred Supplier List?

As a contractor, you are completely within your rights to choose your own umbrella company; however, many recruitment agencies will prefer you to use a provider on their PSL. Recruitment agencies will often create a PSL to give temporary workers as they do not want to be associated with non-compliant providers and do not want contractors to be caught out by tax avoidance schemes.

A PSL is a select list of umbrella companies that have been carefully vetted and have passed the agency’s compliance and financial standards. If a recruitment agency doesn’t conduct thorough due diligence checks and works with a tax avoidance scheme, it poses a great risk to the agency and the end client under the transfer of debt legislation. As a result, many recruitment agencies will only consider umbrella companies for their PSL who are FCSA accredited or SafeRec certified.

What should you do if you want to use an umbrella company but your recruitment agency won’t let you?

Many contractors choose to conduct their own due diligence and sometimes find a provider they would like to use that is not on the agency’s PSL. If this is the case, what should you do if you want to use an umbrella company but your recruitment agency won’t let you?

If you are working through an agency on a temporary assignment and you identify an umbrella company you would like to use that isn’t on the agency’s PSL, ask your agency to review the umbrella, as they may allow you to get paid through that provider – providing they pass the agency’s compliance checks.

If you are an employee of Churchill Knight Umbrella and have accepted a new role with a different recruitment agency or end client, please notify us of your new role and provide us with your agency or end client’s contact information. If we are not on your agency or end client’s Preferred Supplier List, one of our dedicated Business Development Managers can contact them directly on your behalf if required.

Unfortunately, some recruitment agencies will not allow you to use an umbrella company that is not on their PSL. But, if you don’t feel comfortable registering with an umbrella company, it is entirely your choice, and you do not have to. Sadly, this may mean you may not be able to work on the assignment you had lined up through the recruitment agency.

What are my other options if I don’t want to use an umbrella company?

It is important you understand your payroll options before accepting a temporary assignment. Ultimately, a lot will depend on your IR35 status and whether you are deemed inside or outside IR35. Many contractors prefer to accept roles that are outside IR35 to allow them to operate via a limited company and pay themselves tax-efficiently through a combination of salary and dividends.

If you accept a role inside IR35, most contractors choose to register with an umbrella company. This ensures you pay the correct tax and National Insurance to HMRC. Providing you use a compliant umbrella company, you will not receive any unexpected tax bills in the future.

However, if you do not want to use an umbrella company, you do not have to, and you should never feel forced to use one – particularly if you feel the provider is non-compliant. If you work via a recruitment agency, they may offer workers the option to get paid via agency PAYE – the agency’s payroll. The agency is responsible for paying the contractor directly, deducting taxes and other contributions, and sending the payments to HMRC. Not all agencies will offer agency PAYE, and many agencies and end clients often prefer to outsource payroll to umbrella companies and insist that their temporary workers use umbrellas for compliance purposes.

Always use a compliant provider for your payroll

Whether you can choose your payroll provider or are willing to use an umbrella company on your agency’s PSL, you must research and conduct thorough due diligence before registering. Choosing a compliant umbrella company is incredibly important to ensure you pay the correct amount of tax and National Insurance and avoid any potential future tax investigations.

Here are a few things you can look out for to ensure the umbrella company you are going to use is compliant:

• Accredited by the FCSA – The FCSA is a membership body dedicated to ensuring that the supply chain of contractors, freelancers, and temporary workers operates ethically and is compliant with HMRC regulations and UK tax law. To achieve accreditation, umbrella companies must pass a series of strict audits and assessments.
• SafeRec certified—Every payslip generated by a SafeRec-certified umbrella company is audited in real time and cross-referenced with the HMRC business account. Workers are emailed a payslip audit report every time they are paid to enable them to check that the payroll is processed compliantly and all deductions are legal.
• Good online reviews – You can look at a company’s reviews on Google or Trustpilot to understand what contractors who have used the umbrella company think of the service.
• Been in business a long time—Experience is important in any business, and using an umbrella company that has been around for a long time means they will have lots of experience working with contractors and will understand the legislation that affects the industry.
• Provide a personal service—Having a go-to person who deals with your queries is important to ensure you know who to go to when you have a question and ensure a hassle-free umbrella experience.
• Informative – Umbrella companies should be transparent and honest from initial enquiry to your registration and time with the company. They should provide you with reliable and informative information about the service, how an umbrella company works, and the deductions you will see on your pay.

Churchill Knight Umbrella is an FCSA-accredited and SafeRec-certified umbrella company

Churchill Knight Umbrella is a UK-based umbrella company founded by professionals with over 50 years of combined industry experience in the contractor payroll sector. We are committed to compliance, proudly accredited by the FCSA, and are a SafeRec Certified umbrella company. Churchill Knight Umbrella is perfect for contractors and freelancers looking for a compliant and reliable umbrella company.

To learn more about our umbrella service or request a tailored take-home pay calculation, please call 01707 871622. You can also schedule a call for a time that suits you, and a member of the team will contact you to discuss the service.