Working through an umbrella company
Find
How outyou'll aboutbe howpaid, and what you’ll be paidpaid, and how to check your pay when you’re employed by an umbrella company as a temporary worker.
How an umbrella company works
An umbrella company is a business often used by recruitment agencies to pay temporary workers.
In most cases, the umbrella company employs you and pays your wages through PAYE.PAYE. It does not find temporary work for you,you. thisThe is done by the recruitment agency (also known as an employment business).business) does this.
AlthoughThe the umbrella company is your employer and will pay you,you. theThe work you carry out will be for one of the recruitment agency’s clients. This work is often on a short-term basis.
What happens after you contact a new recruitment agency
The first time you contact a recruitment agencyagency, the steps to set up temporary work and employ you begin. The process may involve:
- a client — the business that needs temporary workers
- a recruitment agency — that finds temporary workers for a client
- an umbrella company — your employer for temporary work from that recruitment agency
- you (the worker) — who contacts the agency about temporary work
Each plays a role in the supply chain and has a contract for the temporary workwork. butThey witheach have different responsibilities. The supply chain often works in the following way.
The client needs temporary workers
The client is the business that needs temporary workers. It sets up a contract with a recruitment agency to find and engage temporary workers.
The recruitment agency searches for workers
The agency either:
- finds a suitable candidate from its contacts
or - advertises the role, stating the pay rate (weekly, daily, or
hourly).
You may not get paid thisthe rate,advertised pay rate. This is because it usually includes the umbrella company’s operating costs.
Some clients may assess whether the off-payroll working rules apply to the role. These rules apply where workers contract though their own limited companycompany, or an intermediary. The check employment status for tax tool can help them assess this.
If the client decides that off-payroll working rules would apply to the role, the job advert may describe it as being ‘inside IR35’. This may mean that, either:
- you are deemed to be an employee
or - the client (or recruitment agency)
mayasksaskcompany.company
You become an umbrella company employee
Before the recruitment agency can offer you a temporary role (assignment)(assignment), they may ask you to be employed by one of their preferred umbrella companies. You may be able to choose your own.
The agency must give you a Keykey Informationinformation Documentdocument. whichThis should include:
- the umbrella company for all temporary work from this agency
- the minimum assignment rate paid to the umbrella company (this is sometimes known as the uplifted rate, umbrella rate, day rate, or hourly rate)
- what the umbrella company will deduct
- your minimum gross pay
The recruitment agency agrees terms with the umbrella company
The agency sets up a contract with the umbrella company. This outlines that the umbrella company is responsible for:
- employing you and paying your
wageswages, in line with theKeykeyInformationinformationDocumentdocument - invoicing the agency for the time you’ve worked
The recruitment agency discusses the role with you
For each new temporary role, the recruitment agency must give you new assignment detailsdetails. toThese will confirm:
- who you’re working for
- your job title
- what you’re going to do
- the notice period to end the assignment
- where you’ll work
- any health and safety issues (for example, if you need personal protective equipment)
Your employment rights
As an employee of an umbrella company, you have the same employment rights as other employees.
You have a right to a written employment contract. AnThe Acas guide to employment contracts explainson howthe theyAcas work(Advisory, Conciliation and Arbitration Service) website explains:
- how employment contracts work
- what must be written in
them.them
You have the right to be paid at least the National Minimum Wage or National Living Wage, :
- on time
and - in full
- at the
agreedasagreedsetoutKeykeyInformationinformationDocument.document
UnlessYour youemployer have opted out, you must be auto-enrolledautomatically onenrol toyou into a workplace pension scheme, if youyou’re areeligible. eligible,The and the deductions for this should appear on your payslip.
Holiday entitlement
You are entitled to paid holidays. CheckThere yourare holiday2 entitlementways withto yourcalculate employer.holiday pay.
Your umbrella company may pay you ‘rolled up holiday pay’. This is where an additional amount is included in every pay mustslip beto deductedcover fromholiday thepay.
Alternatively, assignmentyour rateumbrella forcompany may use a ‘52 week reference period’ to calculate your jobholiday andpay, thenwhich is paid back to you when you take leave.
Check your holiday entitlement and claimhow your holiday pay is paid leave.to you with your umbrella company.
How you get paid
-
WhenYouyouagency,agency. -
The
itrecruitment agency charges the client. -
The recruitment agency
thenraterate, multiplied by the time you have worked. -
The umbrella company
isresponsibleforpayingpays you as your employer.
Some umbrella companies may choose to pay the National Minimum Wage rate for all hours workedworked, and then make up your full rate with an additional payment, like a bonus. You must still pay tax on this additional paymentpayment. andYour your payslip must show this and all the hours you’ve worked.
Understanding how your gross pay is calculated
You have a right to a payslip that shows your pay.
You may also receiveget a ‘reconciliationreconciliation statement’statement (also known as a pay statement) from the umbrella companycompany. whichThis shows you how your gross pay is worked out from the assignment rate.
How an umbrella company works out your gross pay from the assignment rate
The recruitment agency pays the umbrella company the assignment rate, then the umbrella company makes several deductions to work out your gross pay.
The reconciliation statement shows the breakdown of deductions. You should normally see the following deductions on the statement:
- umbrella company operating costs (sometimes called ‘margin’)
- employer National Insurance contribution
employercontributioncontribution- holiday pay
- Apprenticeship Levy (if applicable)
TheYour gross pay is the amount after these deductions have been taken off is your gross pay.off.
If you do not understand the deductions, or if you are not given a breakdown of them, you should speak to your umbrella company.
Checking your payslip
Your umbrella company will deduct the following from your gross pay:
- Income Tax
- employee National Insurance contributions
- employee workplace pension
contributioncontributions - student loan repayments (if applicable)
- other deductions that you have agreed to or are legally required to pay
Your pay after these deductions is your takenet home pay (also known as ‘nettake-home pay’).pay).
The National Insurance and pension contributions taken off your gross pay should always be employee contributions, not employer.
If you have issues with your pay, you should speak to your umbrella company first to try to sort out the problem.
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If your pay is not what you expected
If youyou’ve have been promised higher pay by your umbrella company
You are responsible for paying the correct amount of tax and National Insurance, even if youyou’re are employed.
Many umbrella companies follow the tax rules. Some do not. Some of these umbrella companies promote tax avoidance. whichThis involves bending the rules of the tax system to pay less tax.
What to look out for
Your umbrella company could be involving you in a tax avoidance schemescheme, if you get:
- a separate payment which you are told is not taxable,
suchlikeas - paid more money
paidintoyourbankaccount - a payment from someone other than your umbrella company, which has not been taxed
- asked to sign another agreement in addition to your employment contract
CheckRead whatabout to look for on your payslips and the tax avoidance arrangements used by some umbrella companies.
If you’re concerned you may be involved in tax avoidance
If the umbrella company makes you an offer that sounds too good to be true, true:
- take time to consider it
and - ask for full
details.
Read personal stories from those who have been caught up in tax avoidance schemes.
You can use our tool to check if you may be involved in a tax avoidance scheme by using the check if you are at risk of tax avoidance tool. This will tell you how to to:
- report the umbrella company
and - get help to sort out your
tax.tax
You can contact HMRC for help to get out of a tax avoidance scheme and put your tax affairs right.
Ways to protect yourself
Make sure you have access to your payslips,payslips. reviewReview them when you receiveget them and keep copies for reference.
Look for signs that your umbrella company might be operating fraudulentlyfraudulently. asThis this can have an impact on you.
Signs of fraudulent activityactivity, suchlike as mini-umbrella company fraud, can include frequent changes to your umbrella company that you have not asked for. You may be able to spot this if your umbrella company’s namename, or its PAYE reference number is on your payslips and they often change.
Frequent changes in employer can affect your your:
- employment history
and - ability to secure
loansloans,suchlikeasmortgage.mortgage
You should check that the umbrella company is correctly paying your your:
- Income Tax
and - National Insurance
contributions, - pension contributions
and - any student loan
repayments.
Check that the deduction amounts on your payslip match the amounts shown in your:
- personal tax account
- student loan repayment account
- pension accounts
You can check your personal tax account online or download the HMRC app.
If an umbrella company says they are accredited or approved by another organisationorganisation, check with the accrediting body to make sure.
Get help with your pay and rights
You should discuss your pay and employment rights with your umbrella company first.
If you still have concerns after thisthis, you can contact:
- Acas,
(Advisory,usingConciliationtheirandArbitrationService)website - Citizens
AdviceAdvice,(‘Contactusingus’theirpage)website - your trade union representative
Acas provide free and impartial advice to employers, employees and their representatives on their rights and obligations.
Report concerns
You can report tax fraud and avoidance by a person or business to HMRC online or, or call the HMRC fraud hotline.
You can reportcomplain concerns about pay and work rights including if Nationalyou Minimumhave Wage,concerns about:
- an employment
agencies,agency - working
gangtimemasters,limits - National
orMinimum Wage - minimum wage when working
hours.in farming or agriculture
Updates to this page
Last updated
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A link to a tool to help you work out pay from an umbrella company has been added.
-
Added information on checking to see if you have paid the correct amount of tax and National Insurance, and protecting yourself when working through an umbrella company.
-
Guidance about who is responsible for paying you in the 'How you get paid' section has been updated, and the 'Checking your payslip' 'section has been updated to mention the umbrella company will make deductions that you are legally required to pay from your gross pay.
-
This guidance has been updated to show how umbrella company workers are engaged. It has new sections to help workers understand their pay and employment rights and check that their tax and National Insurance is correct.
-
The section 'Check how you're being paid' has been added.
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A link to 'Check your payslip if you work through an umbrella company' has been added to the 'If you think you are using an avoidance scheme' section.
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First published.
Update history
2025-04-07 08:00
A link to the policy paper ‘Tackling tax non-compliance: umbrella company market’ has been added.
2024-12-03 14:08
A link to a tool to help you work out pay from an umbrella company has been added.
2023-11-29 12:12
Added information on checking to see if you have paid the correct amount of tax and National Insurance, and protecting yourself when working through an umbrella company.
2023-02-09 08:31
Guidance about who is responsible for paying you in the ‘How you get paid’ section has been updated, and the ‘Checking your payslip’ ‘section has been updated to mention the umbrella company will make deductions that you are legally required to pay from your gross pay.
2022-11-07 07:00
This guidance has been updated to show how umbrella company workers are engaged. It has new sections to help workers understand their pay and employment rights and check that their tax and National Insurance is correct.