Contractor Umbrella Employment FAQs

(9–12 minutes to read)

We have compiled a list of some of the key questions you may want to ask about working through Contractor Umbrella.

The list is updated all the time, so do email us if your question doesn’t appear below:

What is Employer’s National Insurance and why does it appear on my pay calculation?

Employer’s National Insurance is a tax paid by all UK employers whenever they pay wages to an employee.

It appears on your pay calculation because in order to pay you, an umbrella company pays all costs of employment from the money they receive from an agency or end client. The passing-on of the obligation to pay Employer’s NI to the umbrella company is one reason that contractor pay rates are higher than permanent salaries.

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What is an umbrella company?

An umbrella company provides a solution to freelancers and contractors who don’t want to deal with the administrative burden of self-employment, and for whom setting up a Limited company is uneconomical or undesirable. By acting as a single, continuous employer throughout multiple contracts, an umbrella company pays contractors under the PAYE system like permanent employees. This removes the need for contractors to complete a self-assessment tax return (assuming no other sources of income) and drastically reduces time spent dealing with admin – leaving contractors and freelancers free to get on with their jobs.

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How does Contractor Umbrella work?

It’s really quite simple. You sign a Contract of Employment with Contractor Umbrella, and we sign a contract to supply your services with your recruitment agency or end client. Once you begin work, you’ll need to complete a timesheet through Contractor Umbrella and have your time authorised by the agency or client – once this is done, we’ll invoice them for your time. When we receive payment for the work you have completed, we’ll pay you under the PAYE system (with all applicable taxes deducted) and email your payslip to you. If you have questions at any point, you’ll have a dedicated Contract Manager who you can contact.

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Can Contractor Umbrella help me with a contract overseas?

As long as you are UK resident for tax purposes, Contractor Umbrella is able to employ you and process pay for you. Usually, this requires you to be physically present in the UK for at least 183 days in any given year. However, residency rules are complex and there are exceptions and caveats, so please contact one of our advisers on 01206 591 000 if you require further information.

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What are the benefits of choosing Contractor Umbrella?

Contractor Umbrella have been trading since 2002 – and as one of the UK’s longest-running umbrella companies, we’ve learned a thing or two about how to operate one! We’re always striving to be the best we can be and are proud of the standard of service we provide, including:

  • A one-stop online portal for any administration required, such as timesheets
  • All emails will be answered within 4 working hours
  • No robots – all calls will be answered by a trained adviser within 3 rings.
  • A dedicated Contract Manager for the duration of your employment with us, so you can speak to the same person each time you call.
  • Strong working relationships with recruitment agencies, ensuring no delays to your pay.
  • With 17 years – and counting! – experience under our belts, we have unparalleled knowledge and streamlined procedures not available within other umbrella companies.
  • Please visit our Benefits Page for more information.

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What is my employment status?

All contractors working through an umbrella company sign a full Contract of Employment and are classed as permanent, full-time employees. Although you’re working on temporary contract jobs or completing freelance work, you’re not classed as self-employed for tax purposes. Your umbrella company will take care of all applicable taxes and administration on your behalf, as with permanent employee.

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What is the cost of the services you provide?

Umbrella companies retain a margin from the agreed contract rate which is received from your recruitment agency or end client. With Contractor Umbrella the margin is £95 per month, or £25 for weekly paid employees. This margin is the only money we make – unlike some umbrella companies, there are no addditional ‘hidden’ costs and our margin is shown front and centre in your pay calculation.

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What insurances am I covered by?

As our employee, you’ll be covered by the following insurances:

  • Employer’s Liability insurance, up to £10,000,000
  • Public Liability Insurance, up to £5,000,000
  • Professional Indemnity Insurance, up to £5,000,000

All our employees are covered by our insurance – there’s no additional charge.

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Do I need to be concerned about IR35?

As a contractor, you’ve likely come across IR35 legislation – put simply, it’s legislation designed to ensure that ‘disguised’ employees, working through their own Limited companies, are paying the same rate of tax as permanent employees. Currently, the legislation only applies to workers in the public sector – but it’s due to be extended to private sector contractors in April 2020.

Umbrella companies pay their contractors through the PAYE system, with all applicable taxes deducted at source, so you’ll be outside the scope of IR35. Our employees do not receive dividends in any form – Contractor Umbrella do not offer a Composite Scheme or Managed Limited Company, and you should be wary of any umbrella companies attempting to circumvent the legislation in this way.

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How much money can I expect to take home?

Your net take-home pay will depend on several factors, but as a general rule will be between 60% and 75% of the gross rate depending on your rate of pay – sadly, higher income means more tax as you fall into higher tax brackets. For more a precise figure, give us a call on 01206 591 000 and one of our advisers will be happy to help.

Bear in mind that all compliant umbrella companies calculate your pay in the same way, and you won’t see much variation in your pay between them. You should be extremely wary of any company offering 80-90% take-home pay – these businesses are operating outside the law, and the high-profile fines and penalties that HMRC is currently imposing on tens of thousands contractors who historically used such schemes should serve as plenty of warning.

You may have heard that you can claim expenses through an umbrella company to increase your take-home pay. However, as of April 2016, this is no longer the case – HMRC have restricted the ability of umbrella companies to pay expenses as an anti-abuse measure. However, if you do incur significant expenses in the performance of your duties, you can reclaim some of the tax you’ve paid through a self-assessment tax return.

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What happens when I register?

Registration is completed online – you just need to follow this link. You will then be sent an email with your username and details of the documentation that we will require from you to complete the registration process. You will also be contacted by an Contract Manager, who will remain your primary point of contact throughout your employment with us. Your Contract Manager will contact your recruitment agency or end client, take care of all administration required and confirm the details of your assignment. You’ll need to accept the assignment on our online portal to confirm that you’re happy to begin working.

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What happens if I don’t have a P45?

If you don’t have a P45 from your previous employer, you’ll be put onto a temporary tax code. This code is dependent on your circumstances during the year.

Typically, HMRC will update your tax code within two weeks of us processing your first payment, so you’re unlikely to stay on a temporary tax code for long. If you end up overpaying tax under the temporary code, it will be refunded to you in your first payslip after we receive an updated code.

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How and when will I be paid?

You’ll be paid as soon as we receive funds from your recruitment agency or end client. Unlike some umbrella companies, all of our payments are made by same day transfer for no additional fee – this means that money will be in your account on the same day that it arrives in our account*. Providing cleared funds are received into our bank account by 9am, we will make payment to you the same day.

You’ll receive notification that you’ll be paid by text and/or email, depending on your preference. Once the payment is processed, you’ll also be sent your payslip and pay calculation.

*Please note that due to bank clearing times, same day payments made very late in the day may not show in your bank account until the following morning. Providing cleared funds are received into our bank account by 9am, we will make payment to you the same day.

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What about my VAT, PAYE and NI liabilities?

Unlike running your own Limited company, with Contractor Umbrella you don’t need to worry about any of the administration surrounding tax. We take care of all VAT, PAYE and NI liabilities and make payments directly to HMRC.

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What about online security?

Your personal details will remain entirely confidential at all times. No unnecessary personal data will be held, and no data will be held longer than necessary. In addition, our employee portal is secured via SSL (Secure Socket Layer) technology, so your privacy is guaranteed.

For further details, please see our Privacy Policy.

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What if I decided to leave Contractor Umbrella?

We’ll be sorry to see you go! If you’re moving on for any reason, please provide us with notice of your intention to terminate your employment with us. We will collect all outstanding funds from your assignment and make a final payment to your bank account. Once this is done, we’ll issue you with a P45 and formally end your employment with us.

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Still thinking about if you should join Dolan Accountancy?

Give us a call on 01206 591 000 or email jessica@jvbconsultancy.co.uk

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