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Recruiters - What to do When Umbrella Companies Fail to Pay Your Contractors

As a recruiter, you spend a lot of time sourcing the right contractors for your clients’ needs, building trust with them, looking after them and making sure they have everything they need to do a great job. The last thing you want is a panicked phone call from a contractor because the money they were expecting has not turned up in their bank accounts. So, what can you do when an umbrella company has failed to pay your contractors?  

Understand your contractors’ point of view

Unpredictable pay is one of the main causes of stress among contractors. A late payment can mean the contractor is unable to pay their own bills on time, and the potential consequences of that can be devastating. This is as true for high earners as it is for lower-paid contractors; a missed salary payment can cause serious problems for anyone.

So, the panicked contractor on the other end of your phone needs to know that you understand how important this problem is, and that it’s going to get your immediate attention. Reassure them that you’ll look into it right away and get back to them when you have an update. Then keep your promise.

Speak to your contact at the umbrella company

Depending on the umbrella company and your relationship with them, this might be your Key Account Manager, an Agency Care team, a customer service specialist or an administrator working in payroll. If at all possible, it’s best to follow the umbrella company’s process and contact them using the details they’ve given you. That way your query will land where the umbrella wanted it to, and you should get through to someone who knows how to help.  

The vast majority of umbrella companies will want to pay your contractors correctly and on time, so if that has not happened it’s a safe bet that something has gone wrong. The first order of business is to find out what the problem is and fix it.

You may decide to have a separate conversation with your umbrella contact about service levels once your contractors have been paid, but it’s usually best to wait until you know exactly what happened and the issue is resolved. Aside from anything else, your contact can’t start working on the problem until they’ve finished talking to you, so try to save the discussion of any wider issues for later.

Stay with the issue until it’s resolved

Umbrella pay is generally robust and simple, but it does rely on two separate companies (your agency and the umbrella) getting their processes to line up, so there are a number of things that might have gone wrong.

For example, the umbrella may be missing a document, a signature or something else from an admin team at your end.

If this is their first payment, the umbrella company may need something from the contractor, for example they might be missing ID, right to work documents, bank details or tax information.

It’s also possible that the umbrella has everything they need and have simply made an admin error.

Each call with the umbrella should end with a time-bound agreement about what will happen next, until you have confirmation that your contractors have been paid, and obviously your contractors need to be kept updated at every stage.  

Ultimately, the umbrella company will want to pay your contractors as soon as they can and the main thing is to focus on helping them do that.

How to make sure your contractors always get paid

As we said earlier, it’s difficult to completely eliminate the chance of errors occurring but there are things you can do to make them less likely. Umbrella companies are usually experienced in high-volume payroll, and errors of this type should be vanishingly rare so if you’re getting a lot of them, it might be time to take action:

Use an umbrella PSL

Preferred supplier lists are usually used to speed up your vetting process; you have a list of “pre-vetted” umbrella companies that you’re happy to work with, and you steer any umbrella contractors towards that list so you don’t need to vet new umbrella companies “on the fly”.

This has the positive side effect of allowing you to choose which umbrella companies you work with, so you can select them for high service levels, experience and expertise.

Cultivate a closer relationship

Once you’ve chosen the best umbrella partners to join your PSL, take the time to get to know their payroll process and resolve any bottle necks between your agency and your chosen umbrella companies. This might be something you do yourself, or you might put someone from an internal team at your agency in touch with their opposite number at the umbrella. The closer the two companies can work together, the faster and more smoothly the process will run. You’ll also find that these closer relationships make errors easier to resolve when they do occur.

Iron out your timesheet process

One common cause of delayed payments is that a timesheet hasn’t been completed in time, or has not been signed off by the end client. If this happens a lot it might be worth looking at your timesheet process to see if you can make it easier. Where appropriate, involve your contacts at the end client – after all it’s in their interests to avoid delayed payments as well.

Help your contractors complete their registration

Make sure new contractors are expecting contact from the umbrella company and they know what to expect from registration. You shouldn’t need a lot of detail because the process is usually quite simple and the umbrella will be experienced at onboarding new contractors. Just make sure the contractor knows broadly what to expect and understands the importance of completing their registration right away. That way, you’re less likely to see delayed payments due to incomplete registrations or missing documents from the contractor.

What to look for in an umbrella company

Throughout this article we’ve assumed the umbrella you’re working with is experienced at high-volume payroll and is interested in looking after your contractors. There are hundreds of companies using the label “umbrella company” and this won’t be true of all of them.

We strongly advise recruitment agencies to carefully vet any umbrella company they work with for compliance, expertise and service levels. This process should usually be completed as a condition of entry onto your PSL.

If you have questions or if we can help in any way, please call our expert team on 01296 468483 or email

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