Umbrella Company Fees: How Much Should You Pay?

How much should you pay in Umbrella Company fees?

Why do Umbrella Companies charge fees?

Every umbrella company offers the contractor a range of services and benefits and in return, charges the contractor a fee:

  • The umbrella company employs the contractor and puts them on their payroll. In turn, the company pays the contractor a regular salary and deducts their tax and National Insurance through the PAYE system. This means there is no need for the contractor to undertake often tricky tax calculations through self-assessment as a self-employed contractor would.
  • The umbrella company offers the contractor a range of statutory benefits, including sick pay, holiday pay, maternity or paternity leave, and a workplace Again, this is a major benefit for umbrella contractors, unlike self-employed contractors who would need to cover the costs out of their own pocket should they wish to take time off to go on holiday.
  • The umbrella company invoices the client on the contractor’s behalf, chasing any late payments.
  • The umbrella company provides the contractor with the basic level of insurance required to carry out the contract. This typically covers professional indemnity insurance, public liability insurance, and employer liability insurance as a minimum. Again, this is not the case for self-employed contractors who are responsible for covering these costs out of their own pocket.
  • Umbrella companies can also offer additional perks and benefits including same-day payments, additional levels of insurance cover, extra holiday pay, help with things like childcare credits, help with processing business expenses, and any other paperwork or admin tasks.

How much do Umbrella Companies charge?

Now you know why umbrella companies charge their fees, let’s get down to business and look at how much they charge. After all, this will come directly out of your pay cheque, meaning it’s important you get a fair deal.

Umbrella company fees vary from company to company but typically contractors can expect to pay upwards of £15 per week in umbrella fees.

This varies depending on the services and benefits offered by the umbrella company, however. Clearly, if you only require minimal services from the company you can expect to pay the lower amount. However, if you require a range of benefits and additional services you will pay higher umbrella company fees.

How are Umbrella Company fees charged?

Now you know how much you can expect to pay in umbrella company fees, let’s look at how fees are charged, as this can also have an impact on how much you will end up paying.

Umbrella fees can be charged as either fixed fees or percentage fees.

  • Fixed fees: like they sound, fixed fees are when an umbrella company charges the contractor a fixed fee, whether this is on a weekly or monthly basis. This is taken off the contractor’s income before it is processed for PAYE.
  • Percentage fees: here, on the other hand, the umbrella fee is worked out and charged as a percentage of the contractor’s invoice value. This is usually the worst option for contractors who can end up paying higher fees merely if their contractor rate increases whilst receiving the same level of service in return.

 

For this reason, most contractors prefer paying their fees as fixed fees as it means they won’t have to pay more if they begin to earn more.

Fees can also be charged as net fees or gross fees.

This can also have a big impact on how much you end up paying meaning it’s important to take into consideration when choosing which umbrella company to work with.

  • Gross fees: here, the contractor will be charged their fee before tax relief has been applied
  • Net fees: however, with net fees, the contractor will be charged the fee after tax relief has been charged

Are there any other Umbrella costs to take into consideration?

Umbrella companies may also charge the contractor additional costs which can have a direct impact on your pay.

Some extra costs to account for include:

  • Sign-up fees: some umbrella companies charge a one-off joining fee
  • Exit fees: likewise, umbrella companies can also charge a one-off fee for leaving the company
  • Charges for additional benefits or admin tasks: it’s important to look at whether the umbrella company charges extra costs for additional benefits like same-day payments or admin tasks such as processing expenses, as this can have a direct impact on how much you end up paying

For this reason, it is always important to take the time to understand what the umbrella company fee covers and whether you will incur any additional costs for extra services or benefits.

Find an Umbrella Company that’s the best fit for you

Now you know what to look out for when it comes to umbrella fees and how much you should be paying, the next step is to use Umbrella Supermarket’s contractor calculator to compare umbrella company fees.

Our umbrella calculator takes all the hard work out of comparing umbrella fees for you, showing you exactly how much you will pay in exchange for what services in an easy-to-view list.

Simply enter a few key details, such as your contractor day rate and preferences, and we will show you a list of the best-suited umbrella companies for you as well as how much you will pay in fees under each company.

To find out how we can help you today, why not try out our award-winning umbrella calculator for yourself?

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