How Much are Umbrella Company Costs?

Umbrella company costs: What you need to know

Why do umbrella companies charge a fee?

Before looking at how much you can expect to pay in umbrella costs, let’s first look at why umbrella companies charge a fee.

An umbrella company becomes the contractor’s employer, in turn giving them a range of benefits and services in exchange for a fee.

The kinds of services and benefits that umbrella companies offer include:

  • Paying the contractor a salary: as the contractor's employer, the umbrella company will pay the contractor a salary. They will also deduct the correct levels of tax and National Insurance from the contractor's salary, paying contributions to HMRC as they are owed. This means that the contractor needn't worry about troublesome tax calculations and filing for self-assessment as their tax obligations are taken care of by the umbrella company.
  • Taking on business tasks: unlike a limited company contractor, who not only has to focus on the contract work at hand, but also has to work on running their own business, an umbrella company will take care of the business side of things for contractors. The umbrella company takes on tasks including paperwork, admin, expense processing, invoicing and chasing payments.
  • Giving the contractor statutory rights: as the contractor’s employer, the umbrella company also covers the contractor with statutory rights. This includes holiday pay, sick pay, maternity/paternity pay and a workplace pension. So, if you fall ill unexpectedly, the umbrella company will organise statutory payment to the contractor, giving you some all-important peace of mind.
  • Covering the contractor with insurance: finally, the umbrella company also covers contractors with certain types of insurance, namely Employer’s Liability Insurance which is a legal requirement. On top of this, some will also offer other forms of insurance if required in the contract.

That is the range of services you can expect to receive from an umbrella company, so, how much will you pay in return for these?

How much are Umbrella Company costs?

The important thing to remember is that umbrella company fees will vary from company to company, however, they start from around the £25 – 30 figure each week.

If you use minimal services from an umbrella company, you can expect to pay the minimum fee. In contrast, a contractor that takes advantage of a range of additional services from the umbrella company will usually pay more for these.

As well as the amount you pay, it’s also important to understand how the umbrella company charges their fees, as this can also impact how much you end up paying.

How does an umbrella company charge its fees?

There are two main ways that the umbrella company can charge their fees, including:

  • As a fixed fee: this is a set fee taken from the contractor’s fee
  • As a percentage: this is when the fee is worked out as a percentage of the contractor’s earnings

Often, the percentage fee option can be worse for the contractor, meaning that if the contractor begins to earn more, they will pay more in fees to the company. Therefore, it's always important to look at how the umbrella company charges its fees.

Another thing to consider when comparing umbrella costs is whether the company charges their fees as net or gross fees.

  • Gross fees: when an umbrella company charges a gross fee, the contractor is charged the fee prior to tax relief being applied
  • Net fees: when an umbrella company charges net fees, however, the contractor is charged the fee one tax relief has been charged

Clearly, this can also have a significant impact on how much the contractor will pay in fees, so this is also important to look out for when comparing costs.

Are there any extra costs to take into consideration?

On top of the costs we have already outlined in this guide, umbrella companies can also charge some extra costs for particular services.

These include:

  • Charges for signing up: some umbrella companies will charge the contractor a one-off fee when they join the umbrella company. Although this is a one-off cost is important to look out to ensure you get a fair deal.
  • Charges for leaving the umbrella company: likewise, some umbrella companies will charge a fee when the contractor decides to leave the umbrella company.
  • Charges for admin tasks: it is also worth noting that some umbrella companies will charge extra for certain admin tasks, including things like processing same-day payments or expenses. If these are things that you will make regular use of then this is worth checking, as you might end up forking out a lot for these services.
  • Charges for insurance cover: finally, some umbrella companies can charge additional fees for extra levels of insurance cover. Although every umbrella company must legally provide Umbrella Companies Professional Liability and Professional Indemnity Insurance, some contractors will need additional cover depending on their contract, so if this is the case, it’s always important to check what the additional costs will be.

Next steps – find your perfect umbrella company

Now you know how umbrella companies charge their fees, how much you can expect to pay and what you will get in return, it’s time to take the next steps and find the perfect umbrella provider for you.

That's where Umbrella Supermarket comes into play. Our quick and easy-to-use umbrella company calculator makes finding the best umbrella company for you hassle-free. Just put in your details and we will show you a list of the best companies based on your needs. Ready to give it a go for yourself today?

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