It’s been a tough couple of weeks for some sections of the UK contractor community; although you could argue that a bit of research and due diligence could have helped to avoid all the heart ache.
The first big story was the collapse of Tract Management which left hundreds of contractors unpaid and out of pocket to the tune of thousands. Tract were signing contractors up to an umbrella scheme which used complex foreign currency deals to avoid tax and when it all went wrong the directors proceeded to disappear. No communication, no warning, just gone.
Shortly after the Tract collapse, the rumours about the demise of another ‘traditional’ umbrella company began to surface and we started to receive a large volume of calls from their contractors looking for help too (there has been no formal announcement yet though so I won’t be naming names just yet).
The most regrettable thing about both of these instances is that large numbers of contractors simply won’t be paid for all their hard work. The staffing businesses that place them and the end clients suffer from a loss of reputation and a great deal of hassle, all because of the bad practice or downright negligence of their service provider. Occurrences such as this also reflect badly on the rest of us, despite, in our case over a decade long track record of doing things correctly.
Sadly, there isn’t much a contractor can do after their umbrella goes bust so it’s vital that you keep your timesheets up to date and don’t sit on piles of them. This will minimise the damage done should your umbrella disappear overnight.
The best way to protect yourself is to do your homework upfront before signing up. The old adage that if ‘something sounds too good to be true it usually is’ is a good rule of thumb here so beware of umbrella companies making unrealistic claims about your take home pay. It’s also worth keeping in mind that the UK government is clamping down on tax avoidance and many of the racier tax led umbrella solutions have been forced to re-examine their business models. Some are doing this correctly and keeping their contractors in the loop however large numbers are simply leaving their contractors at risk of investigation and a huge tax bill (plus interest!).
So do your home work and take any umbrella league tables with a pinch of salt. The majority are owned by the umbrellas themselves or ask umbrellas to pay a subscription to be included so they are not impartial and are not reflective of the industry.
Contract Eye and Contractor Calculator have some excellent independent guides to umbrella companies which include checklists of the types of questions you should be asking before you sign up and are well worth a read.