Contractors who have never used an umbrella company before or are used to operating via their limited company often ask, ” What is an umbrella company margin?”. Our latest article provides an overview of an umbrella company margin and how often it is deducted.
What is an umbrella company margin?
Working via an umbrella company is often regarded as the easiest way to get paid as a contractor or freelancer, and an umbrella company can provide many benefits. However, becoming an umbrella company employee is slightly different from working directly with an employer or end hirer.
One difference is the umbrella company margin, which is a deduction to cover the company’s operating costs. The margin is charged to temporary workers to cover the company’s operating costs, such as staffing and administrative costs.
Umbrella companies will deduct the margin from the funds they receive for the assignment rate from your end hirer or recruitment agency before processing your payroll and paying your net salary (after tax deductions) into your bank account. For more information about the deductions that will be made to your pay when working via an umbrella company, please visit the government’s website.
How often will the umbrella company margin be deducted?
Compliant umbrella companies can only generate income from the margin they charge to temporary workers. The margin is the amount of money that an umbrella will deduct every time they process your payroll – usually weekly or monthly.
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Will the umbrella company margin be deducted if I am not working?
Compliant umbrella companies will only deduct a margin for the weeks you work, and payment is processed for you. They will not charge a margin for the weeks you do not work.
What margin should I expect to pay?
Weekly and monthly margins vary between providers according to the services they provide. For a weekly margin, you can expect to pay between £15 – £30, and for a monthly margin, you can expect to pay around £50 – £100. An umbrella company deducts its margin from the assignment rate before income tax and employee National Insurance are deducted.
What is the difference between a gross and net margin?
The gross margin is taken before tax, meaning it’ll cost you less. The net margin is the amount of your take-home pay you’ll have deducted, and it is usually a couple of pounds less than the gross amount. Annoyingly, some umbrella companies quote their margin net of tax while other providers quote the gross margin. This can be confusing when you are trying to compare margins between different umbrella companies.
Get a free take-home pay calculation from a top 10 umbrella company
If you are looking for an umbrella company, why not request a take-home pay calculation from one of our top 10 umbrella companies to find out what your take-home pay could be? All you need to do is complete the short form, and we’ll pass your details on to a top 10 umbrella company. They’ll let get in contact with you discuss their service and answer any questions you may have. They will also provide you with an accurate take-home pay calculation.
