Umbrella company

Mel Rowbotham

KDR Recruitment’s guide to umbrella companies

What is an umbrella company?
An umbrella company provides a way for contractors to get paid rather than their client payrolling them directly or the contractor having to set up their own limited company. You are legally employed by the umbrella company and can then offset your business expenses, such as mileage, against your taxable pay.
This means you end up with more take home pay than if you were paid on the company’s payroll.

Why would I choose to get paid via an umbrella company?
Generally, you’ll benefit financially if you are earning less than £35-£40k p.a. If you earn more than this and aren’t allergic to paperwork, you’ll probably be better off forming your own limited company. Umbrella companies are great if you only want to contract for a short time (anything less than two years) and also remove any worries about calculating your own tax or having to do any accounts.

How do I choose an umbrella company?
There are dozens of umbrella companies in the UK and the only difference between them is the fee they charge and their customer service. Beware any company making claims about guaranteed take home pay percentages (this isn’t something they can guarantee) or encouraging you to claim expenses you haven’t actually incurred (it’ll be your neck on the block if HMRC investigates.)

At KDR Recruitment, we aren’t affiliated to any one umbrella company and don’t accept payments from them in return for referrals. We recommend you look for companies that are accredited by FCSA or Professional Passport, read contractor forums or ask colleagues for recommendations. If you use a comparison website, make sure it’s not owned by an umbrella company as the reviews may be a tad biased!

I’ve chosen an umbrella company – what next?
If you’ve decided that you want to contract via an umbrella company, just let us know so that we can make the necessary contractual arrangements with them.

This can take a few days or a couple of weeks so try to give us as much notice as possible before your contract is due to start.