An umbrella company acts as the employer for contractors and freelancers working on fixed term contracts. The umbrella company will provide the services of the contractor to the agency/end client.
The contractor will supply their timesheets and expense claims. The umbrella will use the information to collect the contractors earnings from the agency/end client. The umbrella company will then pay the Tax and NI contributions and make any other deductions such as pension contributions and student loan repayments. This means the contractor is paid PAYE just like a full time employee.
As an employee of an umbrella, contractors have certain employee rights such as full statutory benefits including holiday pay and sick pay. Professional indemnity, public and employerâs liability insurance are all included within the umbrella companyâs services.