The Umbrella Companies Team has added a new video to our YouTube Channel and wanted to share it with our readers. Please check out this blog to view our video called ‘What is an umbrella company margin?’ The transcript of the video is below, as well as a link to our channel.
What is an umbrella company margin?
In under three minutes, we’ve done our best to explain all of the important information about umbrella company margins. The video is below. For more information about umbrella company margins, please visit our page: Umbrella company margins – a guide for contractors.
Video Transcript – What is an umbrella company margin?
If you don’t have time to view the video and would rather review the transcript, here it is! Scroll down and see what’s covered in the video.
An umbrella company margin is a pre-agreed amount that an umbrella will deduct each time they process the payroll of a temporary worker. This is the only income that a compliant umbrella company will generate, with the rest of the deductions, including income tax, national insurance, pension contributions and student loan repayments going to the government or pension provider. Every deduction that an umbrella company will make should be outlined and explained before you register with them. Requesting a detailed take-home pay calculation from an umbrella before registering is a good idea. If you are working through a recruitment agency, ensure you are issued with a Key Information Document before accepting a contract.
For example, if you use an umbrella company for weekly payments, the umbrella should have stated their weekly margin, and this will be deducted from your gross pay before the rest of the legal deductions are made. Weekly umbrella company margins are commonly between £15 and £30 but will vary between companies.
Umbrella company margins are used to cover the umbrella company’s administrative costs, staffing and other business expenses. For example, umbrella companies will include insurance and other benefits that will cost the business money.
Choosing the umbrella company with the lowest margin will ensure you retain more of your pay. However, you should not focus your search for a reliable umbrella company solely on the margin. This is because some umbrella companies may offer a poor level of service, and you will be better off choosing one with a slightly higher margin that you can trust.
Here is some helpful advice. Umbrella companies will usually quote you their gross margin, and this is taken before the rest of the deductions – meaning you save on tax. Therefore, the net margin will be lower. For example, a £15 per week gross margin will mean that the amount of money you have deducted as part of the margin will be slightly less than £15 in real terms.
It is rare, but some umbrella companies will deduct a margin based on the percentage of your pay. This may be preferred by contractors and freelancers on a lower rate of pay. However, those with higher pay may end up paying a higher margin compared to a fixed weekly margin, and this should be taken into consideration.
Before choosing an umbrella company, always make sure they are compliant. We recommend that you only seek the services of an umbrella company with an FCSA or Professional Passport accreditation because these businesses have undergone strict audits to ensure they operate compliantly and in the best interests of their employees.
Visit the Umbrella Companies YouTube Channel
We’re having a lot of fun collating a series of videos that answer all the important questions about umbrella companies. Please make sure you visit the Umbrella Companies YouTube Channel frequently for new content. If you have a question that you think we should put into a video, please email it to info@umbrellacompanies.org.uk.
Top 10 umbrella companies
Our website is full of helpful and informative information about umbrella companies. One of the resources we’re most proud of is our top 10 umbrella companies list. Every umbrella company in our top 10 is accredited by the Freelancer and Contractor Services Association (FCSA) or Professional Passport, and some have special offers at the moment that you won’t want to miss out on. Please check out our top 10 now!
