An umbrella company directly employs contractors and freelancers in the UK and offers a simple and straightforward payroll service. When you register with an umbrella company, they will take care of a majority of the administration – leaving you with more time to focus on your work.
What is an umbrella company?
An umbrella company is a PAYE payroll provider for contractors and freelancers and is similar to both permanent employment and agency PAYE.
Umbrella companies serve as an intermediary between contractors and their recruitment agency (or direct with the end client) and will handle everything to do with contracts, payment and administration for you – saving you time (and stress).
Using an umbrella company can be an attractive option, especially if you are new to contracting as it takes away a lot of the pressure, and requires less commitment than setting up your own limited company.
Umbrella companies are also straightforward to use, and you can be set up and ready to go in under fifteen minutes. The only ongoing administration you are required to do is submit your weekly/monthly timesheets to your umbrella company.
Why do recruitment agencies sometimes require temporary workers to use an umbrella company?
The main benefit of using an umbrella company as opposed to getting paid by your agency is that you will get continuity of employment. With agency PAYE, each assignment with the agency is a separate contract of employment which will end when the assignment ends.
Whereas with an umbrella company, you can have multiple contracts with different clients at the same time or one after the other and your employment will continue from contract to contract.
You will still be seen as one employee of the umbrella company and your tax code won’t be affected, meaning you shouldn’t be overtaxed. Continuity of employment is also beneficial if you are applying to borrow money or are considering applying for a mortgage.
Recruitment agencies may also require their candidates to work via an umbrella company as additional extras are often included as part of the service, which may be necessary for contractors to do their jobs – for example insurance.
A step by step guide to how an umbrella company works
If you are not familiar with how an umbrella company works, they may seem confusing. However, umbrella companies are regarded as the easiest way to get paid as a contractor or freelancer, and a good company will offer assistance every step of the way.
We have created a breakdown below of how an umbrella company works from sign-up to ongoing service and what you can expect each step of the way.
1. Registering with an Umbrella Company
Getting set up with an umbrella company is very simple, and you can register over the phone with a consultant or via an online registration form. If you are new to contracting or have any questions, it is advisable to register over the phone because a consultant can explain the process in detail and ensure you understand the next steps.
2. Contracts and Agreements
Once you have completed the sign-up process, the umbrella company will send you a welcome email which will explain the next steps you need to take to complete your registration. Your offer of employment will usually be subject to you returning a signed contract of employment, proof of identity and a copy of your visa or work permit (if applicable), and a P45. Don’t worry – if you don’t have a P45, you can always complete the Starter Checklist for PAYE which will give your umbrella company the required information. You will be sent a link to this document upon sign up.
Your umbrella company will also contact your agency or end client to let them know you have signed up to the service. Each party will enter into an overarching agreement and will sign a contract agreeing to the terms of the arrangement and exchange assignment details.
3. Complete and submit your timesheets
While you are completing work for your client, you will need to submit signed timesheet each week or month, determined by your payment frequency.
Depending on your working arrangements, timesheets will either need to be sent to your end client or recruitment agency to sign off.
Your timesheets will reflect the number of hours you have worked and will let the umbrella company know how many hours they need to invoice your agency or end-client for.
Once you have a submitted a timesheet and it’s been returned to you and signed off, you will need to send it to your umbrella company. Most umbrella companies will have a dedicated email, portal or app for you to submit your timesheets.
4. The umbrella company will invoice your agency or end client
Once your umbrella company receives your timesheet, they will raise an invoice to your agency or end client for the work you have completed.
5. The agency or end client will pay the umbrella company
Your recruitment agency or end client will then arrange payment in line with the assignment details and will send funds across to your umbrella company to process for tax and NI.
6. You will be paid and receive a payslip
Your umbrella company will process the payment received and will make the correct tax and National Insurance deductions before paying your net salary into your bank account. You will also receive a payslip which will show you precisely what deductions have been made (tax, National Insurance, etc.) and how much you are due to receive.
When you register with Umbrella Company UK, you will benefit from more than just payroll
When you register with Umbrella Company UK, you will benefit from more than just payroll. We use same-day faster payments which means as soon as we receive funds from your recruitment agency or end client, we will pay you the very same day.
We are proudly accredited by FCSA, the UK’s leading industry body committed to compliance within the temporary labour market. By choosing an FCSA approved provider, you can be safe in the knowledge that your pay will be processed legally, and the correct tax and NI will be paid to HMRC on your behalf.
You will also get access to a host of other benefits:
- Flexibility – you aren’t tied in to our service and can use it for any assignment or length of time, plus there are no leaving fees.
- Free £25 million insurance cover – you can benefit from £10 million Public Liability, £10 million Employers Liability and £5 million Professional Indemnity.
- Fully inclusive service – using our service is the easiest was to operate as a contractor as we take care of everything for you; all you need to do is complete and submit your timesheets.
- Ongoing support and advice – our umbrella specialists are on hand to offer support and guidance throughout your time with us.
Click here to find out more about the benefits available to every Umbrella Company UK client.
Contact us for more information
If you are interested in finding out more about our service or would a tailored take-home pay illustration, please give our friendly consultants a call on 01707 669023 or request a callback for a convenient time.