Guide to Using an Umbrella Company

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The process of working under an umbrella company is different than contracting under a limited company. Read below to understand the steps between an umbrella company, recruitment agency and end client.

What is an umbrella company?

An umbrella company is a separate company that acts as an employer for contractors working on fixed term contracts. They also serve as an intermediary between the contractor and their end client or agency. The principle function of an umbrella company is to organise payment for the contractor. To do this they collect the contractor’s earnings from the end client or agency and then pay it onto the contractor with tax, national insurance and their umbrella company fee deducted.

How does an umbrella company work?

There are a number of steps you will take when you work under an umbrella company:

Sign a contract with an umbrella company

The umbrella company will sign a contract with your recruitment agency. You will then sign an employment contract with the umbrella company and become an employee of the umbrella.

Submit your timesheet each week

As an umbrella employee, you will be required to submit a timesheet with information about all of the hours you have worked for along with any expenses to claim. Your umbrella company will invoice your agent/client for the work you have done and will receive funds for you from the agency.

Receive your wages

You receive your money after tax deductions, National Insurance contributions and an umbrella fee. Your umbrella company will send you a payslip as with permanent employment. Wages will be paid directly into your bank account regularly.

Support from your umbrella company

For help and advice working under an umbrella company, our sister company can help. Parasol is on hand to provide you with you with support and answer your questions. For more information, please visit Parasol’s website or call us on 0800 464 0379.

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