Umbrella Companies Explained

We speak to Patrick McConnell about the current state of the umbrella market, speaking about the recent rise in umbrella company workers and what the biggest draws are for professionals who are about to take the leap from permanent employment.

First all, can you tell me a little bit about yourself, and what your business offers?

My name is Patrick McConnell, Managing Director of OpenPay Umbrella solutions. OpenPay is a professional Umbrella Solutions company for new and experienced contractors, as well as agencies and companies who require a safe, cost efficient and compliant solution. We have developed a web based system designed to streamline our client’s processes that works hand in hand with our friendly knowledgeable staff. We have built our business on good people and smart systems, both of which I feel is integral to a successful umbrella solution.

What do you think the biggest draws of the umbrella route is for contractors?

I’d have to say flexibility, umbrella companies are easy to use and quick to setup, they require no long term commitment which is attractive to many first timers. Also, the ability to offset legitimate business expenses against taxable pay without having to run a Ltd. company is something that our clients find most refreshing.

A lot of the hassles of running a Ltd. company do not apply when working through an umbrella, for example there is no requirement to complete year end accounts and no risk of IR35. I like to think that it allows contractors to focus on their business while their umbrella provider takes care of them.

The amount of contractors entering the profession is rising. How has the umbrella market adapted with this increase?

I think that this rise has been felt across the board really, and umbrella companies have had to improve. By increasing levels of automation and improving processes, the sheer volume of professionals taking the contracting route can be taken care of with minimum hassle from either party, and as more people enter the market, umbrellas have had to manage the induction and weekly management processes more effectively through use of the right technology.

With a greater number of people using tablets and smartphones, transactions are being carried out online and people are demanding more from their umbrella companies. With the enhanced threat of false self employment of temporary workers and the use of intermediaries, we are seeing more people who have been tradionally self employed move under the umbrella model. These workers typically have a different set of requirements to say, the traditional IT contractor market place. This has resulted in new offerings being created which is generally positive.

What do you consider are the most important factors that make a good umbrella company?

I think a good umbrella company must be fully compliant, provide a great service, and be responsive to their client’s needs. Obviously technology is highly important, especially in our current society, so quick, easy to access 24/7 online systems is a must. As well as that, fixed fee all inclusive admin structures is something that can make a client’s life a lot easier, avoiding % rates without caps and extra charges. A good umbrella solution must provide fast and flexible payments, and should only charge their clients for the time that they are working.

Do you have any tips for new contractors who are unsure which route to go down?

1. Setting up a Ltd. company can be a significant ongoing commitment. If you find out that contracting is not for you, you will have to make returns until your company is dissolved, and that will require the support of an accountant.  You can test the water with an umbrella solution and switch to Ltd. if that option becomes beneficial to you.
2. As for the whole ‘Ltd vs umbrella’ debate, it really is down to the individual. Make sure you research the benefits of both before you make the decision. What works for one person may not work for another.
3. Avoid schemes that promise you the earth in terms of take home pay and are based offshore. At the end of the day it is you the worker that is liable.
4. Shop around and speak to the companies you have short listed so you can get a feel for what they are about and their actual levels of service.