How Umbrella Companies work?

(3 minutes to read)

Working through an Umbrella Company can seem confusing, so let’s take a look at how the process works from Umbrella Company, to recruitment agency or end client to contractor.

How umbrella companies work in 10 simple steps:

  1. The contractor finds an assignment with an agency or client, if direct
  2. You will sign an employment contract with the umbrella company
  3. The Client (who you will be on assignment with) signs the Agency timesheet, which will confirm to them the hours/days that you have worked
  4. You will send the signed time sheet to the Agency and also complete an identical online timesheet for the umbrella company along with any chargeable expense claims if applicable
  5. The Umbrella Company will raise an invoice to the Agency for the work you have done plus any expenses that the client has agreed to reimburse (ie chargeable expenses)
  6. The Agency invoices the Client for work completed plus any chargeable expenses
  7. The Client pays the Agency
  8. The Agency pays the Umbrella Company; the date will be determined by the Agency’s payment schedule
  9. The Umbrella Company processes the payment and any chargeable expenses and deducts the necessary tax and NI contributions. An Umbrella Company will make payment to you through PAYE (Pay As You Earn) and you should receive a payslip from them in the same way as you would in any other employment
  10. The umbrella company deducts employment costs and margin, and calculates the contractor’s taxable pay, taking into account any chargeable expenses

Below is a flow chart which explains the steps that take place between an Umbrella Company, Recruitment Agency and End Client in order for you to get paid each week or month. Please bear in mind that for you to receive a regular income from your Umbrella Company, the steps below will need to be completed according to the Agency’s timesheet and invoicing schedule:

Umbrella Companies Flow Chart

An Umbrella Company will employ you under an overarching Contract of Employment and will be responsible for raising invoices for the work that you do whilst on assignment, this means that you will not have the worry of setting up and running a company or appointing an accountant.

If you have any questions about how an umbrella company works, please call Sophie on 01206 591 000 or email

We have over 20 years experience, have won numerous awards and have helped tens of thousands of contractors. Our friendly, professional contract managers are experts in their field, so no matter the question, we’re sure we can help you.

Signing up couldn’t be easier – just click ‘sign up‘, provide us with some basic details and within 24 hours your online employment file will be activated. We’ll also send you a comprehensive and straightforward employee starter pack and you will be contacted by your personal Contract Manager.

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1 week margin free or £25 reduction on monthly margin. Online registration form must be completed by midnight 6th December 2019. Payment must be processed and margin redeemed by 31st December 2019.