Umbrella company margins explained

When choosing an umbrella company to work with, cost is always going to be a key consideration. But how do brollies charge for their services? What sort of things should you look for when researching the market? 

In this blog, we explain umbrella company margins in a way that is easy to understand, so you can get on with the stuff that matters! Carry on reading to find out more…

What is an umbrella company margin?

Umbrella company margin refers to the profit margin that an umbrella company earns from providing payroll and administrative services to contractors and freelancers. This is usually a pre-agreed amount, however, some providers will take a percentage of your total invoice. We would urge you to steer clear of this kind of arrangement as it could end up costing you a pretty penny – especially if you earn different amounts over time. 

This margin is how (compliant) umbrella companies make money. The rest of the temporary worker’s deductions, including tax and National Insurance Contributions will go straight to the government. 

Top tip: If an umbrella provider is offering to save you money on tax – it is highly likely they are dodging tax. Be vigilant!

How can I compare umbrellas? 

Ask your chosen umbrella companies for a pay illustration so you can work out which provider offers the best value for money. The umbrella company margin should be clearly labelled and explained here – if not, it’s a red flag…

Remember, take home pay shouldn’t be the main factor in your decision making. Ensure you also take into consideration whether the umbrella is legitimate and offers a good quality of service. 

What else do I need to know?

• Margins are deducted from your gross pay before other legal deductions are made.
• Weekly umbrella company margins usually fall between £15 and £30 but will vary between companies.
• Umbrella company margins are used to cover the umbrella company’s administrative costs.
• Lowest margin doesn’t always equal best option. 
• Always choose an accredited umbrella e.g. Professional Passport or FCSA.

Fancy working with us? Give us a call on 0203 967 6846 to talk to our helpful team!