FAQ's

Let us answer your questions

What is an umbrella company?

An umbrella company is a business which employs freelancers and contractors who enjoy the variety and flexibility of contracting, but do not want the responsibilities which come with running their own business. Joining an umbrella company offers a degree of security and consistency in the way you work, and you do not have to worry about managing your own accounts or dealing with the taxman.

How does umbrella employment work?

If you decide to work for an umbrella company, you become an employee of the company just like any other employee. You will receive a contract of employment and be entitled to statutory employment rights and statutory protections. It is the umbrella company that then provides your services to the agency or client, not you directly.

How do umbrella companies generate their revenue and make their profit?

The umbrella company invoices the client for the work you do during your assignments. It retains its margin from the revenue you generate. The margin covers administrative costs and contributes to its profit from the work its employees have undertaken.

How is my pay as an employee of an umbrella company calculated?

You receive a basic salary for the hours you work each week. On top of that, you also receive an additional work-finding commission payment. This is based on the revenue you have brought in during your assignments, after the umbrella company has retained its margin and employers National Insurance.

Are reimbursed expenses taxable?

If you work on a series of assignments for the same umbrella company, you may be able to claim tax relief on the expenses you have to incur to do your job – such as travelling and subsistence. The precise expenses policy may differ between different umbrella companies, so check first. You can find out more about Brookson’s expenses guidance here, or call us and talk to one of our friendly advisors.

What is a dispensation?

A dispensation is a way for HMRC and an employer to reduce administration. Normally, any employer who reimburses tax free expenses to its employees must provide certain documents to HMRC. A dispensation means you do not have to provide these documents. In certain circumstances, round sum expenses (e.g. fixed sums paid regardless of the actual expense) may be paid under a dispensation, but you still need to keep the receipts as evidence.

Your responsibilities and the umbrella company’s responsibilities

Although the precise responsibilities and benefits vary depending on the umbrella company and the work you are doing, the minimum responsibilities are: