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Many people choose to work through Umbrella Companies to lower their administrative burden while contracting, they can still seem quite confusing to many. What steps do they go through to set it up? How do they interact with the clients I’m working with? How do I interact with my Umbrella Company?

In today’s blog, we’ll go through all of this so you don’t need to worry! Here’s your comprehensive rundown on how Umbrella Companies work.

Umbrella Companies: Step-by-Step

Now an Umbrella Company can go about this differently, but usually these are the steps they take to get you setup to paying you for the work you’ve done:

  • Enter a business-to-business contract with an employment agency
  • As you work for the client, you’ll fill in timesheets, like some full-time employees. Indicating how many hours/days you have worked for them.
  • The umbrella company then invoices the agency for the hours that you’ve worked and any expenses you may have incurred during the work you’ve completed.
  • The agency then will invoice the client for your work and the expenses you’ve incurred.
  • The agency is paid by the client.
  • The umbrella company is then paid by the agency, including expenses, and then deducts tax, National Insurance before paying through the PAYE system.
  • You will receive the payslip, noting any deductions that have been made including a fee to the umbrella company themselves.

Using an umbrella company, you’ll see that they do the administrative and financial work for you, for a fee. While most people aren’t experienced in the administrative and financial work that they do, there will be some people who feel like they don’t feel like the fee is worth it and will go about completing that work themselves. But the majority of people, especially when first starting out, will utilise the services of Umbrella Companies to ensure that they can focus on the work and less on the administrative paperwork.

Umbrella companies are under the control of HMRC. All payments they make are done through the PAYE system. It means you should take home as much of your pay as you would as a standard employee, minus the umbrella company fee.

Speak to us today at Brookson for a FREE consultation and we’ll show you how working us is a huge benefit over others! You won’t regret it!

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