Whether you are a first-timer or a seasoned contractor, it is essential to understand the costs involved when engaging with an umbrella company. Understanding the fee structures helps in managing earnings more effectively.
In this guide, we are going to discuss in detail the various fees charged by umbrella companies, how they impact your take-home pay, and what to consider when choosing the right umbrella company to manage your contracting needs.
Umbrella companies make contracting easier by taking care of a contractor's administrative duties, such as handling payroll, taxes, and compliance. However, these services come at a cost, known as umbrella company fees.
An umbrella company is a company that acts as an employer to contractors who work under temporary contracts, typically through recruitment agencies.
The umbrella company handles all administrative tasks related to payroll, taxes, and invoicing. They receive payments from the client or agency, deduct taxes (PAYE, National Insurance contributions), and pay the contractor a salary after deducting their fee.
Contractors under an umbrella company arrangement may receive certain employment benefits such as statutory sick pay, maternity/paternity pay, and holiday pay, which are not available to self-employed individuals.
Umbrella companies provide flexibility for contractors who work on short-term assignments across different clients or projects, without the administrative burden of managing their own company.
Umbrella companies typically charge a fee in return for processing your payroll, providing administrative services, and ensuring compliance with HMRC. Let’s look at the main fees involved:
Most umbrella companies charge either a weekly or monthly fee for their services. These fees range from £15 to £35 per week or £60 to £150 per month, depending on the company and the level of service provided.
Some umbrella companies charge one-off setup fees when you first register with them. While many umbrella companies include setup as part of their standard service, others may charge between £50 and £100 to cover administrative costs associated with getting you set up on their system.
If you decide to switch to another umbrella company or form your own limited company, certain umbrella companies may charge an exit fee, typically ranging from £50 to £100. Not all umbrella companies charge this, so it’s important to check their terms before signing up.
Some umbrella companies offer to manage holiday pay on your behalf, while others may charge for this service. Holiday pay is accrued at 12.07% of your gross pay, but handling fees could reduce the amount you take home if the company charges extra for administering this.
Umbrella companies are required to provide certain types of insurance (such as employer's liability and public liability), which is usually included in their fee. However, for those working in high-risk industries, additional premiums might apply. Some umbrella companies may offer these insurances as add-ons, which could increase your costs.
Many umbrella companies offer additional benefits such as pension contributions, private healthcare, and expense claims management. These extras can come at an additional cost, so it’s important to assess whether the benefits are worth the added expense.
| Umbrella Company | Weekly Margin | Same Day Payments | FCSA Approved | Professional Passport | SafeRec Certified | Insurance Cover |
|---|---|---|---|---|---|---|
| DASA Umbrella | £10 | Yes | Yes | Yes | No | Yes |
| Templeton Brook | £19 | Yes | No | Yes | No | Yes |
| Smartwork Umbrella | £15 | Yes | Yes | No | No | Yes |
| Parasol | £29 | Yes | Yes | No | No | Yes |
| Giant Group | £22 | Yes | Yes | No | No | Yes | Contractor Umbrella | £15 | Yes | Yes | No | Yes | Yes | PayStream | £27 | Yes | Yes | No | No | Yes | Umbrella Company UK | £20 | Yes | Yes | No | Yes | Yes | Brookson One | £20 | Yes | Yes | No | No | Yes | Workwell | £22 | Yes | Yes | No | No | Yes |
When evaluating umbrella company services, contractors need to look beyond the fee alone. Here are some factors to consider:
Ensure that the umbrella company is transparent about all fees upfront. Some companies may offer low headline rates but charge hidden fees for certain services.
What services are included in the fee? A lower fee may come with minimal support, while higher fees could include more comprehensive services, such as access to a dedicated account manager, compliance advice (IR35), or same-day payments.
IR35 compliance is very important. Choosing an umbrella company that ensures full HMRC compliance will help avoid penalties and provide peace of mind.
Does the company offer weekly or monthly payments? Will they process same-day payments or are there additional charges for faster payments? Contractors often prefer companies that process payments quickly, without extra charges.
The quality of customer support can be an important differentiator, especially if you're new to contracting. Look for umbrella companies with good customer reviews and efficient service levels.
Working through an umbrella company can make life easy while contracting in the UK, but it’s essential to understand the fee structure to make the most of your earnings. Always weigh the cost against the services provided, and give importance to transparency, compliance, and customer service when choosing the right umbrella company for you. By comparing fees and services carefully, you can maximize your take-home pay while ensuring your contracts are managed smoothly.
If you are looking for an umbrella company you can trust, below is a list of our umbrella company partners that we highly recommend.
| Umbrella Company | Benefits | Fee | Company Profile |
|---|---|---|---|
 |
Best Umbrella Company: Contracting Awards 2024 [Nominee] FCSA Accredited Professional Passport Approved Same day payments & wage advances available upon request Free subscription to DASA Rewards money-saving App All statutory entitlements including holiday, sick & maternity/ paternity pay | £10 Per Week | View Profile |
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Professional Passport Approved Payroll flexibility (weekly, bi-weekly, monthly) Free tax investigation consultation* Free employment dispute advice* Contractor portal Outstanding customer service |
£19 Per Week | View Profile |
If you are looking for an umbrella company, we can help you with that. You can either fill-up the Request a Call-back form below or write to us at [email protected]. You can also have a look at our list of top umbrella companies.