Umbrella Company Glossary
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There is a misconception that umbrella companies are highly complicated. While there is plenty of information to get your head around, they’re far more straightforward than you might have imagined.
To help you understand umbrella companies better, we’ve created an umbrella company glossary that provides simplified definitions for many of the key terms and topics surrounding umbrella companies. Our site is full of resources to assist contractors and freelancers, and many of the definitions below link to further information that we hope you find helpful.
There are currently 6 Umbrella Company Terms in this directory beginning with the letter A.
A
Accreditation
With over 500 umbrella companies in the UK to choose from, it’s a good idea to pick one with an accreditation from a professional body. Two leading professional bodies in the UK are committed to ensuring the supply chain of temporary workers is compliant and ethical – the Freelancer and Contractor Services Association (FCSA) and Professional Passport.
To obtain an accreditation from either the FCSA or Professional Passport, umbrella companies must undergo a strict series of assessments and audits to prove they operate compliantly and follow HMRC’s rules and regulations. Once accreditation is obtained, umbrellas must annually prove they still adhere to the strictest compliance standards and are complying with UK tax law
Accrued Holiday Pay
Umbrella company employees are entitled to holiday pay which is calculated at 12.07% of the assignment rate. Some umbrella companies will give employees the option to have accrued holiday pay. This means that the umbrella will hold back holiday pay until the employee opts to have it paid to them in a lump sum at a later date.
Advantages
There are plenty of advantages of using an umbrella company for your payroll. Precise advantages will vary between providers but include: compliance (PAYE), no tie-in period, minimal administration, an easy registration process, employee benefits, continuity of employment, added extras (such as an employee reward scheme), low weekly/monthly cost (umbrella margin), and Same Day Faster Payments.
Apprenticeship Levy
The apprenticeship levy is an employment cost that is deducted for the assignment rate an umbrella employee agrees with their end-client or agency. Calculated at 0.5% of an employer’s annual salary bill, the apprenticeship levy, unsurprisingly, is a tax to fund apprenticeships in the UK.
Assignment Rate
The assignment rate is the pay rate that a worker agrees to undertake a contract. The assignment rate (gross) will be subject to PAYE deductions and employment costs and will include any holiday pay that a worker has.
Auto-Enrolment (Pensions)
When you register with an umbrella company, you become an employee, and the umbrella is your employer. As a result, the umbrella is legally required to auto-enrol you into a pension scheme within 12 weeks. However, while this may be frustrating if you don’t want to contribute towards a pension, you can opt out after making your first contribution. Any contributions you have made will be returned to you as long as you opt out within the specified timeframe.