Answers to 7 umbrella payroll questions - Featured Image

Answers to 7 umbrella payroll questions

We understand that umbrella payroll can seem confusing at times and you’re not alone. We have compiled a list of 7 most frequently asked questions to show how easy umbrella payroll can be.  

1. What is an Umbrella Company and how will it work for me?  

Here at Optimum Pay, we work alongside your recruitment agency as their payroll provider. You will become an employee of Optimum Pay and your agency will purely be there to help you find your next assignment. From day one, you will be treated the same as a full-time employee of Optimum Pay and will get all of the same rights including holiday pay, sick pay and maternity or paternity leave. As well as taking care of all your Tax and National Insurances, we’ll cover you for all of your insurances—Professional Indemnity, Public Liability and Employers Liability. 


 2. How does an umbrella company work? 

For contractors, an umbrella company is an easy and straightforward way to operate. It's as simple as registering with an umbrella payroll company and then either logging into their online portal to log the hours you have worked or alternatively sending your timesheets to a dedicated email address. Once submitted the Umbrella Company will invoice the agency for the end-client for the total number of hours you have worked over a set period. The umbrella company will then pay you your monies minus any deductions such as tax, NI, pensions, charges etc. This will be paid directly into your bank account and your payslip will either be sent directly to you. 


 3. Are umbrella companies compliant? 

We would like to say that all umbrella companies are compliant and above board however this is not the case. The vast majority of umbrella companies are compliant and look to provide you with the best possible service however there are companies out there that do not have your best interests at heart.  

We are accredited by professional Passport. Professional Passport is an independent professional membership organisation working with all sectors of the flexible workers market: Contractors. Agencies. End clients.  

It gives you peace of mind knowing that you are fully complying with HMRC rulings and legislations. 


Things you need to lookout for:  

- Umbrella companies offering fixed percentage take-home pay. (No legit Umbrella company should be able to offer you a fixed percentage without knowing your personal tax details). This indicates that they are playing around with your wages.  

- Any Umbrella companies offering loan schemes  

- Any Umbrella not operating in the UK or using an offshore bank account 

- Companies offering a tax avoidance scheme  

Using these types of services can often land you in big trouble with HMRC and you could end up owing thousands of pounds in unpaid tax. 


4. How much does it cost to join an umbrella company? 

There is usually no joining or leaving fee for most compliant umbrella companies. Umbrella companies make their money by charging a weekly or monthly fee. Umbrella fees can be either a percentage of your earning or a fixed rate per pay cycle. Most respectable umbrella companies charge between £15 and £30 a week.


 5. Am I employed or self-employed?  

If you fall under supervision, direction or control (SDC) your wages should be treated as PAYE. If you fall outside supervision, direction or control (SDC) and depending on whether your client is happy to pay you self-employed, we offer a CIS payroll model which will verify your UTR number & CIS registration whereby we would deduct our margin & 20% to pay your Tax to HMRC. 


 6. When will I be paid?  

We will receive your working hours each week to help us accurately process your payroll. Once done, we’ll send you a text message and an email payslip every Friday letting you know you’ve been paid and your total salary for the week. Then sit back, relax and enjoy your pay!  


 7. How do you calculate my holiday pay? 

Holiday Pay is included in your hourly rate provided by your recruitment agency. We offer you two simple options:  

Option One: Your accrued holiday pay will be paid out to you weekly as part of your salary. This means you’ll be able to see how much holiday pay you have earned each week. When you take time off work, there will be no holiday pay to pay out to yourself. 

Option Two: We can deduct your holiday pay from your wages weekly, which will go into a pot for you and build up each week. You will be able to see the total holiday pay you have accrued and are able to request for it when you need to take time off work, Not decided? Not to worry! We will automatically enroll you into Option Two. This can be changed at any time by contacting our payroll team. 


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