How is an Umbrella Company structured?
An Umbrella Company acts as your employer. You sign an employment contract with the Umbrella and just like a permanent employer, they are responsible for:
- Paying you
- Paying all applicable taxes and deductions to HMRC
- Administering your workplace pension
- Statutory payments – such as sick pay and maternity pay
- Covering you with appropriate insurance
- Holiday pay
- Declaring your earnings and tax figures to HMRC
As an employer, an Umbrella Company will also provide references, handle attachments of earnings and deal with your agency.
Some Umbrellas provide additional perks and benefits as part of the package. These can include childcare vouchers, rewards schemes, discounted foreign exchange and more.
What’s my relationship with the Umbrella Company?
As above, the Umbrella Company becomes your employer. The Umbrella signs a contract with your agency or end client – this means that you have no formal employment relationship with the agency/client you are working for.
The Umbrella Company remains your employer once your assignment is finished. This means you can take multiple assignments, even through different agencies and your employer remains the same. This is often beneficial for references and credit checks, as you are continuously employed.
How am I paid through an Umbrella Company?
Your Umbrella invoices the agency for work that you have done. Sometimes you will need to submit an additional timesheet to them – other agencies are ‘self-billing’, which means they will provide the information for your Umbrella Company to raise the invoices.
The agency will then pay the Umbrella Company on an agreed timescale. This tends to be within 7 days of invoicing (payment a week in arrears), but can vary depending on the agency and client – always check how long it will take to be paid.
Once the Umbrella receives money, they will pay you. As an employer, they are responsible for employer-side deductions – Employer’s National Insurance, the Apprenticeship Levy and pension contributions. The rate an agency pays to an Umbrella worker should be uplifted (compared to being paid directly by the agency) to account for these deductions.