Setting up a new contractor business or running an existing contractor business can be a minefield, especially managing your income, expenditure and cash flow.
If you choose to work with an Umbrella company, then one of the most critical factors in your decision making will be Umbrella company fees as they can vary dramatically. It can be a fine balance to figure out which Umbrella company is best and getting the best deal on Umbrella company fees so you know you are in the right place for your business.
By opting to work under an Umbrella company, you are ultimately becoming an employee of that company which will have a number of benefits to your contractor business. Your choices will be whether to join an Umbrella company which is usually the quickest and easiest route or to incorporate as your own Limited company which is generally better for a longer-term view.
What are Umbrella company fees and costs?
Generally, there are two types of Umbrella company fees or charges which can be easily identified by the way that they are calculated. Each type of Umbrella company fee will have pro’s and con’s depending on how your contractor business runs and what is best for your situation:
- Fixed Umbrella company fees: This is the most common method for Umbrella companies to charge fees especially in the UK and generally the easiest for being able to manage your costs effectively as it is predictable and stable.
- Percentage based Umbrella company fees: Some Umbrella companies will charge a percentage of your invoice amount which is a method which is mainly adopted by overseas organisations.
The use of a percentage-based Umbrella company fees system is less common in the UK and can be more costly for you and your contractor business if you tend to have higher value agreements with clients.
What are the normal Umbrella company fees?
The modern and incredibly popular contractor market has made the Umbrella and contractor accountancy market to be extremely busy but also highly competitive, so you will find that you will have a choice of different Umbrella companies and Umbrella company fees.
The majority of Umbrella companies will have similar fees and charges which will roughly be around £25 to £30 weekly or £80 to £120 monthly. You should expect Umbrella company fees to vary as well depending on which services they offer and what you want to get out of them.
How will I get paid?
Generally, you will find that there are three main stages to your pay calculations under Umbrella companies which are:
- Statutory pay or basic salary: Umbrella companies will calculate your pay based on the number of hours that you have worked to cover statutory minimum wage.
- Annual leave: As with most contract workers, one of the most important elements of your pay will be the ability to claim annual leave pay.
- Commission or bonus pay: If your pay includes an element of bonus or commission then this will be calculated on top of your standard salary. Any additional costs such as Umbrella company fees will be deducted from this amount.
Maternity or Paternity pay and pension contributions with Umbrella companies
Your pay will be calculated so that you are paying your PAYE and National Insurance Contributions (NIC’s) to cover your statutory requirements. You will also be entitled your statutory maternity or paternity rights under current UK legislation for an employee as well as having to auto-enrol to a company pension scheme under the new NEST regulatory requirements.
Your Umbrella company will automatically enrol you on to their scheme which will be covered under their standard agreement and within their Umbrella company fees. Once you are enrolled you will also have the right to remove yourself or opt-out from the scheme within the allotted time period.
If you need more help or advice around how our Gorilla Accounting Umbrella company fees work then you should speak to one of our team of experts to find out more. We aim to provide an outstanding service to our Umbrella company clients as well as being extremely competitive with our Umbrella company fees structure.