Working through an umbrella company has plenty of benefits. It can simplify your tax affairs, provide benefits such as paid holidays and pension contributions, and may increase your net take-home pay compared with other solutions.
In return for all of this, there are certain umbrella company costs associated with an umbrella payroll service.
So what are those costs, and are they worth it? Let's take an honest look at the costs of working through an umbrella company like Primis.
Why do umbrella companies charge a fee?
One of the most frequently asked questions we receive is "how do umbrella companies make money?"
The simple answer is that there is a fee associated with umbrella services. This will vary for different services and different umbrella companies - so it's useful to keep it in mind when choosing the best umbrella company.
What do you get for the fee?
Your umbrella company fee is what allows the umbrella provider to continue in business, and you get a wide range of benefits as a result.
These include (subject to the T&Cs of your umbrella provider's services) some or all of the following:
Continuous contract of employment
Holiday pay
Pension contributions
Eligibility for tax relief
Guaranteed minimum wage
Insurance cover
Online portal access
Enhanced admin support
Assistance with IR35
Full HMRC compliance
In general, working under an umbrella company removes a lot of the admin burden, tax calculations and lump sum tax bills from contractors, and allows you to work via a more consistent PAYE structure.
How much are umbrella company fees?
The T&Cs of your umbrella service should outline what fee you pay for the services you get. At Primis we include this information in our Key Information Documents (KIDs), which you can find on our website.
For example, if you work under our Umbrella service, we will make the necessary deductions on your behalf, including:
Employer National Insurance
Apprenticeship Levy
Pension Contributions
Personal Tax
Personal National Insurance
Umbrella Fee
Of all of these, the only actual 'fee' is the umbrella margin deducted from your gross earnings - everything else is a tax, contribution or benefit.
How to calculate umbrella company pay
To calculate your take-home pay, check your KID or T&Cs for full details of statutory deductions, individual deductions and the umbrella company's margin you will be expected to pay.
Alternatively, you can use an umbrella company take-home pay calculator to get a quick estimate of your net income, based on your gross earnings.
Primis provides an Umbrella Calculator that just needs your gross hourly or daily rate in order to provide an instant estimate of your weekly or monthly take-home pay.
Want to know more?
There are no hidden fees but remember you will also get many other benefits in addition to your net income - plus admin support that can be invaluable in its own right.
If you'd like to talk to us about the best umbrella service for you, the fees and benefits, and a tailored quote for the take-home pay you'll receive, please get in touch today.