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How to spot a non-compliant umbrella company



Non-compliant umbrella companies

Spotting a non-compliant umbrella

The number of ‘umbrella companies’ operating with questionable practices and targeting unsuspecting contractors has increased dramatically in recent years. With various legislative requirements in place, not least last year’s Criminal Finance Act, it has never been more important as an agency to ensure your supply chain is made up of compliant umbrella companies. The question we hear often is how, exactly, can you spot a non-compliant umbrella company? Well the good news is that there are a number of ways, which we’ll outline in this article.

Only engage with FCSA accredited providers

The first option is to only engage with companies that have been externally verified as compliant. One example of this model is the FCSA. The FCSA is an independent trade body that represents contractor service providers – including umbrella companies. Using independent audits of supplier compliance against a rigorous code of conduct ensures that suppliers carrying this standard have been tested and passed stringent compliance tests. By engaging with or selecting your PSL from these accredited companies, you can be reassured that the highest level of compliance is being adhered to, and the risk to your business is minimal.

All FCSA accredited providers are certified as onshore and categorically not using any schemes that may be construed as ‘tax avoidance’. The REC also recommends that their members only engage with fully accredited FCSA providers.

View payslips or ideally, RTI submissions

Many agencies have their own supplier vetting process. This may be a questionnaire or tender process. Whilst this is of course a strong process, many can go further to really weed out any non-compliant providers. The most efficient way to do this is to request actual payslips for their workers, or even better – RTI submissions.

Any ‘umbrella company’ that is reluctant to share this information with you should instantly raise a caution flag.

But what should you be looking for when you get this information? The first is to look for discrepancies between the payslip and RTI. The RTI should be an exact replica of the payslip for PAYE and Employee NICs. If it is not, then there may be an issue with what is presented in the payslip and actually reported to HMRC.

The second is to look for any items on the payslip that are ‘missing’ from the payroll calculation. The umbrella calculation is simple; after retaining employment costs (including margin) all remaining income should be subject to PAYE and Employee NICS. Any items that aren’t processed through payroll should immediately be of concern.

Ultimately if you aren’t sure please get in touch. We work with many of our agency partners in confirming the legitimacy of suppliers they are being asked to engage with by some of their candidates.

Higher take home pay

We see this written in many places but if it seems too good to be true, it invariably is. Any umbrella offering a higher take home pay to workers than others will be doing so via questionable methods.

All umbrella companies are governed by the same rules. Only the margin should be the differentiator between take home pay. Any company offering wildly different take home pay to a candidate should also raise a caution flag.

Don’t get caught out by non-compliant Umbrella companies, call NASA now and join a fully FCSA accredited service, so you can be sure that your candidates tax is handled correctly.


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