Does an Umbrella Company Charge Fees?

How much are Umbrella Company fees?

Why does an Umbrella Company charge fees?

Firstly, let’s start by looking at why an umbrella company charges fees.

An umbrella company will charge a fee in exchange for offering a range of services to the contractor.

The services that the umbrella company provides will vary from company to company, however most umbrella companies offer the following:

  • The umbrella company becomes the contractor’s employer.
  • The contractor will submit a timesheet to their provider, who will, in exchange, invoice the client and collect the payment. This means that the contractor doesn't need to worry about time-consuming invoicing and chasing payments.
  • Next, the umbrella company will process the payment through the PAYE system. This means that the correct levels of tax and National Insurance are deducted from the amount before it is paid to the contractor. This means that umbrella contractors don’t have the time-consuming and often difficult task of paying tax through self-assessment like self-employed contractors do.
  • As the umbrella company’s employer, the umbrella company will ensure that the contractor receives the statutory benefits that they are entitled to, including holiday pay, sick pay, a workplace pension and maternity/paternity pay. Read more about holiday pay and other statutory benefits for umbrella contractors in our handy guide.
  • The umbrella company will provide insurance that the contractor is legally required to have on the project.
  • The umbrella company will process any expenses that the contractor has incurred on the job.
  • The umbrella company will take on paperwork and admin tasks on the contractor’s behalf.

Some umbrella companies also offer additional benefits for an additional cost, which could include things like help with childcare tax credits.

The great news for contractors is that the umbrella company fee is considered a legitimate expense by HMRC, meaning that contractors do not pay tax on the amount.

It is worth considering that it is an additional expense for umbrella company contractors. However, most self-employed contractors end up using the services of an accountant to help them with tricky tax affairs, which is often the same price or more than umbrella company fees.

How much are Umbrella fees?

This takes us on to how much contractors can expect to pay in fees to the umbrella company.

Usually, contractors will pay around and upwards of just £15 per week. After all, umbrella company fees remain competitive, which is more great news for umbrella contractors.

Fixed fees vs. percentage fees

Next, we will look at how umbrella company fees are charged. After all, there are two main ways this can be done.

The first is a fixed fee. Just as it sounds, here, the fee is a set sum of money the contractor pays to the umbrella company regardless of how much they earn. That means that if you are paying £80 in fees per month, you will pay this to the umbrella company whether you earn £1,000, £3000 or even £10,000 per month.

This can be a good option for contractors as it means that you know where you stand and can organise your finances more effectively. It also means that if you begin to work on a new contract that pays more, you won’t have to pay more to the umbrella company for the same level of services.

For this reason, this is the most common way that umbrella company fees are charged and the method most favoured by contractors.

The other way that the umbrella company can charge its fees is with a percentage fee. This is when the umbrella company takes a cut of the contractor’s pay. So, if the umbrella company takes a 5% fee, they will take this whether you earn £1,000, £3000 or £10,000 per month.

This means that the more you earn, the more you pay to the umbrella company. For this reason, this is usually the least favoured way of paying fees by contractors. After all, you will pay more to the umbrella company if you land a high-earning contract, yet you will continue to receive the same level of services.

Other Umbrella costs to consider

As well as the umbrella company’s fee, some umbrella companies will sometimes charge additional costs for additional services.

This might include charging the contractor extra for things like:

  • A sign-up fee: this is where the contractor will pay the company a one-off amount when they join
  • An exit fee: similarly, this is when the contractor pays a one-off amount to the company when they leave
  • Additional admin fees: this might include additional payments for things such as processing expenses or organising additional levels of insurance cover
  • Same-day payments: some umbrella companies will charge an additional fee if the contractor wishes to receive same-day payments

After reading this guide on everything you need to know about umbrella fees, the next step is to sign up to an umbrella company that’s the perfect fit for you.

Find the best Umbrella Company with our contractor calculator

Umbrella Supermarket makes it quick and easy for every contractor to find an umbrella company that's just right for them.

By using our umbrella company calculator, contractors can input their details and preferences and we will show them a list of umbrella providers perfectly geared towards their needs.

It takes just 60 seconds to find your perfect match, so why not give it a go for yourself today?

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