An Umbrella Company Example
However, sometimes we appreciate the easiest way to understand something is to see it in motion. Therefore, we’ve created an umbrella company example below that explains the whole process – from initially engaging with an umbrella to getting paid.
Keep reading, and we’ll show you an umbrella company example that’s hopefully really easy to follow. In the scenario below, we’re going to introduce a few parties. All parties are entirely fictional in this example – it has just been created to give an accurate and impartial umbrella company example.
Geoff – an IT contractor
UC Umbrella – the umbrella company
Recruitment Delight – the recruitment agency
Data Info Limited – the end-client
1. An IT contractor is required
Data Info Limited requires the services of a highly skilled IT contractor to work on a 6-month assignment. They approach Recruitment Delight to help them fill this vacancy.
2. Geoff lands a contract role
Geoff spots the job and puts himself forward to Recruitment Delight. He is interviewed. Later in the day, he is called by Recruitment Delight and gets the good news – he’s landed the 6-month contract. He agrees an assignment rate that takes PAYE and umbrella companies into account.
3. Geoff is advised he needs to use an umbrella company for his payroll
Recruitment Delight reminds Geoff that to be paid for the role at Data Info Limited, he is required to use an umbrella company – because he’ll be inside IR35 legislation.
4. Recruitment Delight produce their PSL
Recruitment Delight present Geoff with a list of umbrella companies. This is their Preferred Suppler List (PSL). Geoff decided to call a few of them to get an umbrella company take home pay calculation.
5. Geoff picks his umbrella company
After speaking with a few umbrella companies, Geoff decides he wants to use UC Umbrella because their staff were friendly, professional, and a well-respected professional body accredits UC Umbrella.
6. The umbrella registration process begins
Geoff contacts UC Umbrella because he wants to register. He rings up an advisor to sign up over the phone. The adviser runs through UC Umbrella’s service, explains how it works, how his pay will be proceeded, the deductions that’ll be made, etc. Geoff is also given the chance to ask any questions he has.
The adviser also tells Geoff about the extras that UC Umbrella offer their clients – at no additional costs. This includes free insurance cover, Same Day Faster Payments and access to an employee reward scheme.
The registration process then begins and involves giving a lot of personal information, including his full name, data of birth, address, bank details, assignment details etc. Geoff also tells his recruitment agency Recruitment Delight that he has chosen to register with UC Umbrella.
7. UC Umbrella require additional information (by law)
Once Geoff has provided all of the information requested by UC Umbrella, he is advised that the umbrella needs more information to set up his payroll. He is required to send the umbrella his P45 (or a Starter Checklist for PAYE if he doesn’t have one) and his right to work in the UK (because Geoff is not a UK-national).
8. Geoff is emailed his Employment Contract with UC Umbrella
Geoff sends all the requested information to UC Umbrella. Then UC Umbrella send him an Employment Contract for him to review and sign, and an Employee Handbook. When Geoff successfully registers with UC Umbrella, he will legally become their employee. As a result, he’ll have access to Statutory Employee Benefits.
9. The registration process is complete
Geoff is happy with the documents he has received. He signs them and returns them. He has now completed registration with UC Umbrella.
10. The supply chain interacts and sign overarching contracts
Behind the scenes, contracts are exchanged between the end-client and agency (Data Info Limited and Recruitment Delight), and the agency and umbrella company (Recruitment Delight and UC Umbrella). This is so that payments can be sent compliantly down the supply chain, and Geoff can be paid legally and on time.
11. Geoff goes to work
The first day of Geoff’s new assignment at Data Info Limited arrives and he goes to work. 5 days later, Geoff has completed his first week – 40 hours in total.
12. Timesheets are submitted
Now that Geoff has registered with UC Umbrella, he is required to submit the hours he has worked using software that is powered by UC Umbrella. All he needs to do is login to his account (credentials were sent to him when registration was complete) and he can easily enter his timesheets*. He’s required to enter this information quickly because delaying it could result in him getting paid late. Once he submits his timesheets, this information is automatically sent to UC Umbrella and his agency Recruitment Delight.
Recruitment Delight invoice Data Info Limited for the work that Geoff has completed. At the same time, UC Umbrella invoices Recruitment Delight for Geoff’s gross salary.
14. UC Umbrella receives Geoff’s gross salary
UC Umbrella receives Geoff’s gross funds (before deductions) from Recruitment Delight.
15. Geoff’s pay is processed by UC Umbrella
UC Umbrella deducts their umbrella margin from Geoff’s gross pay and then processes his payroll (PAYE). The umbrella company deductions include tax, Employer’s National Insurance and employment costs (Employee’s National Insurance and the Apprenticeship Levy). Other than UC Umbrella’s margin, all deductions are sent to HMRC directly.
Geoff is then sent his salary on the agreed date. A payslip explaining the deductions that have been made it his pay is available by logging into UC Umbrella’s software.
Hopefully the umbrella company example above has helped explain the processes involved when registering with an umbrella company. Initially, using an umbrella company for your payroll may sound like a daunting prospect. However, providing you choose a compliant and established umbrella company, you have nothing to worry about.
* While every compliant umbrella company will process payroll in accordance with HMRC’s tax system PAYE – some will have different procedures in place. For example, some umbrella companies will have varying procedures in place. Some have software, others may require their employees to email timesheets to a designated mailbox. Don’t worry though – the process for submitting timesheets will be explained to you, and don’t be afraid to ask questions. It’s in the umbrella company’s interests to make the process as efficient as possible.