What is an FCSA Accredited Umbrella Company?

With an abundance of umbrella companies advertising their services to you, being able to recognise a trusted provider from a non-compliant one is essential. But how do you tell the good from the bad? Those that take compliance seriously and those that bend the rules and could land you in hot water with HMRC?

One of the first and arguably most important things to find out is whether an umbrella company is FCSA accredited or not. Being a member of this professional membership body, which sets the gold standard in compliance, means an umbrella company is likely trustworthy and working within the confines of the law.

In this guide, we will take a look at why FCSA accreditation matters so much, how to become an FCSA accredited umbrella company and the standards that all members must adhere to.

What is the FCSA?

The Freelancer and Contractor Services Association (FCSA) is a not-for-profit body that was established in 2008 to raise standards and ensure supply chain compliance for the temporary labour market.

This highly reputable membership organisation is committed to safeguarding the future of the independent workforce for the benefit of the UK economy. It does this in several ways, including:

Setting and raising standards for service providers who support professional contractors (like umbrella companies and recruitment agencies)
Promoting compliance to protect contractors
Lobbying government to represent its members and ensure their needs are reflected in policy

The leader in umbrella company compliance

The FCSA is understandably proud of its high standards, which it states “are the most stringent and comprehensive in the industry.” In addition to this, FCSA accreditation is the only compliance standard recognised and endorsed by all leading UK recruitment bodies, including REC, APSCo and TEAM.

To become FCSA accredited - and by this we mean have your membership application accepted and renewed - a business must pass a number of rigorous compliance checks carried out by an independent panel annually. This approach means suppliers not only need to meet strict criteria upon application, but make sure they are maintained.

The body has also implemented ‘Codes of Compliance’, which new and existing members are required to follow. Umbrella companies are asked well over 50 questions regarding their specific processes, before signing a declaration which acknowledges their commitment to upholding ethical and compliant standards outlined in the FCSA Charter.

Working to prevent another Loan Charge scenario

Importantly, FCSA accredited members cannot operate offshore schemes, loan schemes or trusts. This is vital following the Loan Charge fallout, which saw tens of thousands of people handed retrospective tax bills after working through disguised remuneration schemes, which paid them through offshore accounts and via ‘tax free’ loans. This isn’t compliant and poses a big risk to umbrella employees.

So needless to say, umbrella companies with FCSA accreditation offer peace of mind to contractors, who understandably want to avoid entering illegal arrangements at all costs.

Why FCSA accredited umbrella companies are the most trusted

There are a number of ways the FCSA helps ensure umbrella companies are compliant and can be trusted. These include:

Rigorous entry requirements, including a minimum of 2 years of successful trading and 1 year’s full audited accounts provided by the applicant
At least 75 contractors successfully supported
Proven financial liquidity, with assets shown to exceed 2.5% of gross profit
A Fit and Proper Person Form must be completed by each Director of the business applying
FCSA assessors will visit the site of an applicant to interview staff and check processes
All members will undergo compliance checks annually, to have their accreditation renewed

It goes without saying that FCSA accreditation is important. So the next time you’re shopping around for an umbrella company, be sure to look out for the FCSA logo on the provider’s website, which demonstrates their high standards and commitment to operating compliantly.

With over 20 years of experience in providing leading umbrella services for over 100,000 individuals, Parasol is a founding member of the FCSA and sets the standard for compliance in the industry.