When you join an umbrella company, you will be asked to send them your latest P45 – a document you should have received when you left your last job (assuming it was permanent or you were paid via an umbrella company). If you don’t have a P45 – don’t worry. You can complete a short online form on the government’s website called - Starter Checklist for PAYE. By handing over a P45 or completing a Starter Checklist for PAYE, you will help the umbrella company ensure you’re on the correct tax code, meaning you won’t pay too much tax. Don’t forget to request your P45 when you leave your umbrella company.

All umbrella company contractors will receive a payslip when paid, which will showcase the gross rate of pay (assignment rate) and all of the deductions that have been made (resulting in the total net salary for the specific pay period). The deductions you should expect to see on your payslip if you’re using an umbrella company are income tax (PAYE), employee’s national insurance contributions, the umbrella company’s margin, pension contributions (if applicable), student loan repayments (if applicable), holiday pay and employment costs.

As the employer, umbrella companies must legally enrol employees into a pension scheme. Usually, umbrellas will have a preferred pension provider that they enrol employees into within 12 weeks. It’s no secret that most umbrella employees don’t like the idea of being opted into a pension. However, it is possible to opt out, but only once the first contribution has been made (but it can be reclaimed). A small selection of umbrella companies can help contractors with salary sacrifice for pensions. This allows employees to contribute a significant percentage of their salary to a private pension scheme tax-efficiently. If this is something you’re interested in, seek an umbrella that can assist with salary sacrifice and ask them for a take-home pay calculation.

A personal service company (PSC) is generally regarded as a limited company with a sole director. Operating through a PSC outside IR35 is a popular choice for contractors seeking to maximise their take-home pay retention legally.

Many of the most popular umbrella companies in the UK will grant employees access to an online portal. A portal is a cloud-based platform where umbrella employees can log in, view payslips, submit work hours, and carry out additional administrative tasks. Portals are generally considered time-saving tools – assuming they’re up to date. It’s common for umbrellas also to grant employees access to a mobile app – a very similar platform to an online portal accessible via a website. Umbrella portal mobile apps will also allow employees to view payslips, submit hours etc. and appeal to a large percentage of temporary workers using umbrellas for payroll purposes. While a few umbrella companies may have their own in-house portals available to employees, most will team up with a third-party provider such as My Digital and Solutio.

Suppose you are a temporary worker who sources assignments through a recruitment agency. In that case, you will probably have been given a Preferred Supplier List (PSL) from your point of contact at the agency. A PSL is a list of approved suppliers (in this case, umbrella companies) that the agency will allow you to use for payroll purposes. Sometimes, the agency will insist you choose an umbrella company on your PSL, or they will not allow you to work on the assignment. Contractors should never feel forced into using an umbrella company. However, assuming your recruitment agency is trustworthy, a PSL is usually a beneficial asset because the agency will have carefully vetted each umbrella to ensure they operate compliantly and in your best interests. You must conduct thorough due diligence to ensure any umbrella you consider using abides by the strict tax rules in place by HMRC.

The best umbrella companies will include Professional Indemnity Insurance in their standard payroll service - ensuring you're protected. But what is Professional Indemnity Insurance? To put it simply, Professional Indemnity Insurance will protect you against any claims made by your end-client or third parties if they deem your work to have been completed negligently (including poor quality services and advice). The insurance will cover any compensation claims etc.

Professional Passport is a very well-respected professional body in the UK that campaigns to protect temporary workers in the UK. Professional Passport, like the FCSA, offers professional accreditation to payroll providers (including contractor accountants and umbrella companies). Obtaining accreditation is a big deal because organisations must undergo a series of in-depth assessments to ensure they are compliant with HMRC’s rules and regulations. The Professional Passport website states: “Our compliance standards go further and are designed to not only ensure that providers we recommend operate compliantly within HMRC tax rules but also across the many other areas of legislation that apply. We require the highest level of transparency in their operations to ensure workers are clear on any arrangements entered in to.”

Public Liability Insurance is essential because it will protect you against any claims made by the public that have resulted from failures in completing your tasks to the agreed standards. Public Liability Insurance includes the cost of any compensation for loss of earnings, injury or loss to anyone in the general public. Most umbrella companies will include Public Liability Insurance in their employees' standard payroll service. Always check what cover is included before registering with an umbrella company.