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.
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:
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. It is worth noting that all Umbrella Companies are, effectively, controlled by the HMR&C. All payments must be made through PAYE. Therefore, the only difference in your take home pay should be the Umbrella Company’s margin.
You should also be aware that, following the introduction of the AWR (Agency Worker Regulations), some umbrella companies are making unlawful deductions and not disclosing them until contracts have been signed. Therefore, you should ask for confirmation of all deductions, and the reason for the deduction, in writing before signing anything. The claims and promises made by Umbrella Companies vary enormously; most of them will sound too good to be true… and they usually are!