When you sign up with an umbrella company, the contract you’re asked to sign isn’t just formal paperwork — it defines how you’ll be treated, how you’ll get paid, and what protections you actually have. For contractors and freelancers, skimming this document is too big a risk.
In this guide you’ll find the essential clauses to check before you commit — explained in plain English so you’re not confused by legal jargon. Read it, ask questions, and make sure you’re confident in what you’re agreeing to.
1. Employment Status
The contract should clearly state that you’ll be an employee of the umbrella company, not an agency or end-client. This matters because it affects:
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Who pays your wages and handles tax/NI
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Your statutory rights (holiday pay, sick pay, maternity/paternity, pension enrolment)
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Your status in the supply chain
If employment status is vague or missing, that’s a red flag.
2. Pay Rate and Payment Process
Many umbrella contracts confuse the assignment rate (what the umbrella company receives) with your gross taxable pay (what you receive). Your contract must explain:
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What your assignment rate is
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How it translates into your gross taxable pay
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How often you’ll be paid (weekly/fortnightly/monthly)
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How you submit your timesheet or hours
If the calculation method is opaque, ask for clarification. A good umbrella will provide a clear breakdown.
3. Deductions and Fees
Your pay will have several deductions – your contract must list them clearly. These include:
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Income Tax and your Employee National Insurance
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The umbrella’s Employer National Insurance and Apprenticeship Levy
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The umbrella company’s margin (what they charge)
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Pension deductions (if applicable)
If you’re unsure how the umbrella margin works or what you’re actually paying for, take a look at our guide: What is an Umbrella Margin? Where Your Money Goes: Explained. It breaks down how margins are charged and what a fair, transparent fee should look like.
Watch out for vague terms like “administration costs” or “service fees” without explanation. A compliant umbrella company will always be upfront about deductions.
4. Holiday Pay
As an umbrella employee you’re entitled to holiday pay. Contracts normally handle this in one of two ways:
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Accrued holiday pay: you build up the entitlement and claim when you take leave
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Rolled-up holiday pay: holiday pay is included in your weekly/fortnightly pay and clearly shown
A contract that doesn’t clearly explain how holiday pay works could mean you’re missing out.
5. Notice Period and Termination
Check how both parties can end the contract. You’ll want to know:
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What notice you need to give
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What notice the umbrella has to give you
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Under what circumstances the umbrella can terminate early
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Whether any penalties or fees apply
A fair contract gives you clarity, not surprises.
6. Statutory Rights and Benefits
The umbrella must provide details of the rights you have:
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Statutory Sick Pay (SSP)
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Maternity/Paternity/Adoption Pay
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Pension scheme enrolment (and your opt-in/opt-out rights)
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How you access support (HR, payroll queries, etc)
If these rights are not included in the contract, you should question the umbrella’s compliance.
7. Expenses Policy
Since the tax rules changed (especially after the SDC / Supervision, Direction & Control changes), you’ll want to check:
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Whether you’re allowed to claim travel/subsistence expenses
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What the policy for expenses is
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That there’s no suggestion of aggressive or unrealistic tax-relief schemes
If the contract promises unusual expense claims or tax reliefs that feel too generous, walk away — you could be facing a scheme, which puts you at risk.
If you want a full breakdown of what you can and can’t claim this year, take a look at our guide: Can Umbrella Workers Claim Expenses in 2025? The Full Rules Explained. This will help you understand the latest HMRC rules and whether you’re eligible for any legitimate reimbursements.
8. Conduct Regulations
In some contracts you’ll find a clause allowing you to opt-out of the Conduct of Employment Agencies and Employment Businesses Regulations 2003. You need to understand:
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What opting out means for you
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Whether you’re being asked (or pressured) to agree
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How it changes your rights
You should be able to make this choice freely, and understand the implications.
9. Liability and Indemnity
Contracts may include clauses shifting liability onto you — for timesheet errors, client disputes, or other issues. Check:
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What liabilities you’re taking on
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Whether you’re expected to indemnify the umbrella company for client issues
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Whether you’re being asked to assume risks unfairly
A solid contract protects you — not the other way around.
10. Data Protection
Since the umbrella company handles your personal and financial data, the contract must reference how your information will be handled under UK General Data Protection Regulation (UK GDPR) standards:
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How data is used and stored
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Who has access
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How you can request deletion or correction
If this is missing or weak, that’s another compliance concern.
Final Thoughts
Your umbrella contract should be clear, fair and straightforward — not full of legal jargon or hidden clauses. If anything feels murky, ask questions. A reputable umbrella company will walk you through each clause and make sure you understand what you’re signing.
Protect your pay, your rights and your future. Read the contract carefully. Don’t sign on the dotted line until you’re confident.
If you’re reviewing umbrella options, take a look at our Top 10 Umbrella Companies to compare compliant and trusted providers.
