Umbrella Companies - How it Works

There seems to be a lot of confusion and misleading information available about what an Umbrella Company exactly is in the UK, why they are needed, and what is the relationship between a contractor, an umbrella company and the recruitment agency and/or client.

We will try and clear things up for you including the myths surrounding umbrella company services and connected UK tax legislations like the notorious IR35.

What is an Umbrella Company?

An umbrella company is a company that employs freelancers and contractors who are employed through recruitment agencies. As a contractor, you do not become an employee of your client, instead you will be classed as an employee of Unified Payroll, the umbrella company, allowing you to work on numerous different assignments for agencies and end clients, without changing employers.

As a contractor you are able to carry out a number of temporary contracts without the need to manage your own payroll. You carry out the work for the client, complete your timesheet and submit any business expenses to us. As an umbrella company we take care of all the administration like invoicing, chasing and collecting funds from your agency or end client, and pay you as our employee. It really is that simple.


The umbrella company will also deal with all PAYE and National Insurance contributions, allowing you to be able to gain professional independence with all the benefits of being an employee including holiday pay, employers and employees pension contributions, maternity, paternity and statutory sick pay.

Depending on the particular details of your contract, you may be able to claim for certain business expenses that you incur while you're working. We’ll discuss your particular situation with you in detail so you know exactly what you can claim for.
Being a permanent employee also makes it much easier to secure important things like bank loans and mortgages as you’ll have one continuous employment, even if you work for many different agencies and clients during your time with us.
To find out more about employment with Unified Payroll Umbrella please call us 01268 669979 or email .


How does a PAYE umbrella company work?


The following outlines the steps you will take if you join Unified Payroll as a UK-based PAYE umbrella company:


  • After securing a contract role (or an assignment to provide your services to the end client) Unified Payroll, as your ‘employer’ signs a contract with your recruitment agency and you sign a contract of employment with us.

  • You complete a timesheet on a weekly basis and send it to both your recruitment agency and Unified Payroll.  

  • Unified Payroll will then invoice the recruitment agency, and the recruitment company will invoice the end client.

  • We will pay you your wages/salary on due date and notify you the net amount due by text and email.

Please Note

When any Umbrella Company processes your payroll, there will be deductions required to facilitate your employment. These can include: PAYE Tax, NI Contributions (including Employer NI), Apprenticeship Levy, Pension Contributions, Holiday Pay, Student Loan Repayments, and any other statutory deductions required.

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