Umbrella company / PAYE Umbrella

A PAYE umbrella company is a UK limited company, operated by a third party acting as an employer on behalf of its contractor employees. A contract is signed between the umbrella company and the worker who will be carrying out the assignment.

The umbrella provides a payroll service to its employees, deals with administration, processes all timesheets and invoices, and pays its employees a salary after allowing for deductions, such as National Insurance contributions, income tax, workplace pension payments or student loans.

The only revenue that umbrella companies generate for themselves is their margin.

All contractors should be provided with a Key Information Document which shows both the PAYE rate, upon which personal taxes are payable, and the umbrella rate (which is how much the agency will be billed for your time, and includes employment costs, such as Employers’ NI and the Apprenticeship Levy).

Using an umbrella company is uncomplicated and straightforward and generally regarded as the easiest way to get paid if you are a temporary worker. There are definite advantages to joining an umbrella company such as continuity of employment, Employee Benefits, including Statutory Sick Pay and Statutory Maternity/Paternity Pay, very little administration required on your part, low cost and no hidden fees.

Umbrellas companies can be used for any contract role, and specialist services exist for more niche positions, such as drivers and construction workers.

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