What is an Umbrella Company?

By Advice, News

An umbrella company is a business that is commonly used by recruitment agencies in the United Kingdom to pay temporary workers. They provide an employment platform for contractors and freelancers who work inside the IR35 regulations; an intermediary between a contractor, the recruitment agency and the end client (local authority or private limited company).

Umbrella companies are tasked with these main things:

  • Administration for the contractor.
  • Payroll and the authorisation of payment to the contractor.
  • Calculation of the contractors total Gross pay.
  • Invoicing the end client.
  • Accounting: deducting costs such as NICs (National Insurance Contributions), Taxes, Umbrella fees and other deductions required by law.
  • Pays the contractor via PAYE (Pay As You Earn), as if you were a full-time employee.

Your role as the “Contractor”

You have accepted a job as a contractor. What’s next?

  1. Before starting work, you will need to choose an umbrella company to become your employer.
    1. Sign an Employment Contract (states your chosen umbrella company, your end client, the agency, hours per week, etc).
  2. After starting work, you are required to complete weekly Timesheets detailing the hours completed per day, including any expenses that week.


  1. You have accepted an Environmental Health Practitioner position at “XYZ Council”, they are offering an hourly rate of £30 per hour.
  2. You choose “Umbrie” as an umbrella company.
  3. “Umbrie” will deduct the necessary costs by £5 per hour.
  4. Your take home pay will be £25 per hour.

Benefits of an Umbrella PAYE 

  • Your income tax payments are accounted for, so you don’t need to submit a tax return.
  • As an employer, you are entitled to statutory sick, maternity/paternity and holiday pay, and enrolment onto a pension scheme (depends on your umbrella company).
  • Some umbrella companies can offer benefits like health insurance, access to welfare services and benefits packages.
  • Able to work on multiple contracts simultaneously.
  • Are likely to claim for travel or subsistence expenses.

Follow GOV.UK’s on Working through an Umbrella company.

The Glossary of Terms

  • Agency – A business or organisation providing a particular service on behalf of another business, person, or group.
  • End Client – Local Authority or Private Limited Company who are seeking temporary workers.
  • Gross Pay – the full payment an employee receives before tax deductions and mandatory contributions are removed
  • Net Pay – your final take home after all contributions and taxes are deducted from your gross pay.
  • Umbrella PAYE – The rate you can earn before deductions are made from the Umbrella company.
  • Umbrella company – Your employer for temporary work from that recruitment agency.
  • You (the Contractor) – Who contacts the agency about temporary work.

What is Contracting and Permanent employment?

Read Ricky Sharpe’s article on Contracting vs Permanent.

Ricky Sharpe ~ Lead Consultant – Environmental Health (Commercial), Licensing and Town Planning

Next Issue

You probably have a couple of questions, such as what is IR35? Don’t worry I have you covered stay tuned for the next issue we will go into detail into what IR35 is.

Nick Cheung ~ Marketing Executive

Buckingham Futures HQ

We are dedicated to providing our exceptional recruitment and consultancy services to you. With our team of specialist recruitment consultants, they will be able to assist you in your queries and job hunt.
Give us a call on 020 8125 4321 or email your CV to info@buckinghamfutures.com and let’s have a chat!

Recruiting the Present, Inspiring the Future.” ~ Buckingham Futures

#EnvironmentalHealth #EnvironmentalHealthRecruitment #WeAreEnvironmentalHealth #ChooseEnvironmentalHealth #IamEnvironmentalHealth

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