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What is meant by an ‘Umbrella Margin’?

Blog post written by Contractor Umbrella


You may have come across the phrase ‘umbrella margin’ when looking at an umbrella company’s charges, but what exactly does this mean? Here we explain everything you need to know.


How does an umbrella company work?

An umbrella company is essentially the middle man between an umbrella contractor and their client – they are not responsible for finding work for a contractor, but they employ a temporary worker on behalf of an employment agency, and then the agency will provide the services of the worker to their clients.


An umbrella company is a great way for those looking to have all the benefits of a self-employed worker (flexibility, a better work-life balance etc) but with the added security that is usually associated with permanent working.


The umbrella company will pay the contractor for their work, providing a payslip that highlights deductions for taxes and NI, and a pay statement that will also include employment costs, such as Employers’ NI and the Apprenticeship Levy.


What is an ‘umbrella margin’?

An umbrella company is a business, and so like any other business, it needs to make a profit to survive.


An umbrella company won’t necessarily charge what you’d call a ‘fee’ because the margin is recovered from the umbrella income, and not charged directly to the worker (which would make it subject to VAT).


It is instead referred to as an ‘umbrella margin’, which covers the administrative costs, such as running payroll, any relevant insurance and other operational overheads.


How do I choose a good umbrella company?

Of course, you should consider how much an umbrella company will charge when it comes to choosing a good umbrella company, however, this must be weighed up against other important factors to ensure that you are employed by a genuine, professional company that will provide you with a high level of service.


Here’s what should be at the top of your list when looking at umbrella companies:


  • The type of service they provide

Will you have your own go-to person who will deal with any queries or issues quickly without being passed to a different person each time? Having a personal touch is really important when it comes to having a hassle-free experience.

  • Are they accredited?

An accredited company will help to put your mind at ease when it comes to trusting a company and ensuring that they are compliant.

  • Do they have good reviews?

It’s vital to see what people are saying about a company that you’re looking to join, so take the time to look at reviews and testimonials.

  • Have they got awards?

Awards are a great indication of a successful and trustworthy business and when it comes to umbrella companies, being recognised for their achievements in the sector is a good sign.

  • How long have they been in business?

Obviously, every business has to start somewhere, but choosing an umbrella company that has gained the experience and skills needed in their field will be a great benefit to you.



Contractor Umbrella

Hassle-free and straight talking, Contractor Umbrella has been helping contractors since 2002 and is now one of the most trusted umbrella companies in the UK guaranteeing peace of mind, absolute compliance and complete security for all its employees.


Award-winning, Contractor Umbrella is one of the longest-standing and most respected umbrella companies in the UK and is both fully FCSA accredited and an APSCo Trusted Partner.