FAQs
Answering Your Frequently Asked Questions
Umbrella Company Basics
What is Umbrella Employment?
Umbrella company employment is a form of employment that is frequently used by contractors and temporary workers. The worker does not have a direct employment relationship with the end client that uses their services. Instead, they become an employee of an umbrella company that acts as their employer. Read more in our blog here: What is an Umbrella Company? Your questions answered… (danbro.co.uk)
How Does an Umbrella Company Work?
Here is a typical umbrella employment process:
- Employee Engagement – The contractor or freelancer will register with an accredited umbrella provider like Danbro Umbrella. This may be through personal preference or set by industry regulations.
- Contracting – The contractor/freelancer will then agree to provide their services to a client, oftentimes via a recruitment agency. These are often temporary and short-term contracts but there may be scope for extensions.
- Receive Pay – The end client or agency pays the umbrella company, who then pays the contractor just like a normal employee.
- Salary Calculation & Deductions – The umbrella company will calculate the contractor’s remuneration and make all statutory deductions such as income tax, National Insurance contributions and pension contributions if applicable.
- Admin – Typically, the umbrella company handles payroll, taxes, and ensures that employees comply with employment laws on their behalf.
- Continuity of Employment – Even though the employee works on multiple assignments for different customers or agencies, they are nonetheless employed by the umbrella company on a continual basis.
How much does it cost to join an umbrella company?
Umbrella companies often charge margins which can be a fixed fee or a percentage of your salary. The margin is to cover the cost of your payroll and other employment benefits with the umbrella company.
Some umbrella companies only quote the net margin, which is the cost to you after all tax and deductions have been made and not the gross cost, which can be higher. So, be careful when looking for the best deal. We do have some variations on this amount as shown on our Calculator which you can access here. Please contact our team for more information.
How to choose a compliant umbrella company?
One of the best ways to identify a compliant umbrella company is to check if they are FCSA accredited and that they offer PAYE. Danbro Umbrella is proud to be fully compliant and accredited by the FCSA, as well as ISO 9001, Investors in People, and SafeRec, and offers PAYE in full accordance with HMRC rules and guidelines.
Are Danbro Umbrella compliant?
We take compliance very seriously and operate within all employment and tax legislation applicable to our business to ensure that you are well looked after and to prevent HMRC issuing any fines.
We are also fully accredited by the FCSA, IIP, ISO 9001, Cyber Essentials, SafeRec, and Workforce Assured.
Why should I choose Danbro Umbrella?
We’ve operated in this industry for over two decades and make hundreds of thousands of contractor payments each year.
We are also fully compliant and accredited with the FCSA, ISO, and IIP so you can be sure that you and your pay will be fully compliant with all HMRC rules and regulations.
Danbro Umbrella have long-standing relationships with most of the leading UK recruitment agencies as they trust us to provide the umbrella service you deserve.
With Danbro Umbrella you don’t just get a market leading umbrella solution; you also get access to a host of additional benefits like Danbro Rewards which allows you to access exclusive discounts at over 120 top UK brands.
For more information read our blog on the full benefits of umbrella employment here: Umbrella Company Benefits.
Do Danbro Umbrella pay sick pay, maternity and paternity pay?
Yes, as long as the necessary statutory requirements are met in regard to eligibility and reporting criteria, Danbro Umbrella will ensure that you receive the correct amount in your payslip every time.
For more information read our blog on the full benefits of umbrella employment here: Umbrella Company Benefits. You can also read up on umbrella company sick pay, maternity pay and paternity pay in our blog.
How do Umbrella Company Pension Contributions Work?
As an umbrella company contractor, your employer’s contributions to your workplace pension will be deducted from your contracted rate, which is the total amount that the umbrella company receives from your end client or agency for the services you’ve provided.
Other employer’s expenses deducted at this stage include:
- Employer’s National Insurance contributions (NICs)
- The Apprenticeship Levy payment
- Your umbrella company’s margin
If enrolment is compulsory, you must enrol. And, since 2018, it’s been a legal requirement for all UK employers – including umbrella companies – to offer automatic enrolment onto a workplace pension scheme. However, enrolment is not automatic if your earnings amount to less than £10,000 per annum.
Once enrolled, though, you can opt-out or cease active membership. Your umbrella company must let you leave the workplace pension scheme you’re enrolled in if you request to do so and refund you any money you’ve paid in if you opt-out within the first 30 days.
What Paperwork Will I Need to Join Danbro Umbrella?
To join Danbro Umbrella, you need to provide your name, address, bank details, proof of identity, and proof of your right to work in the UK. For tax purposes, a copy of your P45 form from your previous employer may also be required.
How do I use the Danbro OnePortal?
When you sign up with us, you’ll be able to use your email address and password to sign into https://online.danbro.co.uk/login – check out our guide here: Your OnePortal Guide.
Contractor FAQs
What will my take-home pay be?
Danbro Umbrella provides a free online salary calculator to estimate your take-home pay. It considers your contracted rate, pension contributions, tax commitments, payment cycle, and weekly work hours. This popular tool provides a clear outline of your potential earnings as an umbrella company contractor or employee. Try it here now.
How do I get paid as an umbrella company employee?
Danbro Umbrella operates payroll every day, and we will process your payment on the same day, or if received late, the next working day, that we receive cleared funds from your agency or end client.
Why is my umbrella holiday pay subject to tax and NI?
Holiday pay, along with bonuses, overtime pay etc. are all classed as taxable income and are therefore subject to tax and National Insurance.
For more information see our blog: Your Umbrella Company Holiday Pay Explained.
Will I have a workplace pension?
As, as a Danbro Umbrella employee, you will be enrolled onto the Danbro Group SIPP. This is a tax-efficient, flexible retirement pension plan with low charges and diverse investment options – often outperforming other private pensions. It includes a tax-free lump sum and retirement income. Read more here: Pension Guide | Danbro
What pension options do I have as an umbrella employee?
Danbro Umbrella, as your employer, will automatically enrol you onto our workplace pension, Danbro Group SIPP, if eligible. We are also able to refer you to Danbro Financial Planning who can provide you with specific financial advice on all pension and related matters open to you.
Alternatively, with our Danbro Umbrella PLUS plan, you are able to make additional contributions to your pension via salary sacrifice, or pay into a different pension of your choice.
Can I Continue to Use my Current Pension Provider if I am an Umbrella Employee?
Danbro Umbrella PLUS clients can make payments into an existing pension plan, providing that your pension provider accepts payments from us.
What Will my Employment Status be if I Join an Umbrella Company?
You will be an employee of Danbro Umbrella. We will ask you to read and accept our terms and conditions that come in the form of your contract of employment.
What Does My Tax Code Mean?
Your tax code is set by HMRC and controls the amount of tax-free money you receive when you are paid. Watch our video here which explains what each code means and you can find further information on the government’s website.
Can I Work For More Than One Agency at a Time?
Yes. You can work with multiple recruitment agencies simultaneously. When you join Danbro Umbrella, you will be considered as a single employee, even if you are working on several contracts for different recruitment agencies. You don’t have to worry about your tax code being negatively impacted.
What happens when I work for more than one company or agency in the same pay period?
Just tell us the details and we will process your payments, simple as that – we take one margin per timesheet processed. Depending on how much you earn as an umbrella company employee, getting paid twice in the same tax period may mean that your tax bill for that week/month is higher than normal. This doesn’t necessarily mean that you’re paying more tax, though. Please feel free to contact our expert Umbrella team to discuss your circumstances further.
Can I claim expenses through an umbrella company?
As a contractor you may incur expenses that your agency has agreed to reimburse. These expenses are often referred to as billable or chargeable expenses. Chargeable Expenses can be claimed through us and offset against tax and national insurance, providing we have confirmation that your agency is reimbursing you for the expenses and there’s an online claim on our portal with supporting VAT receipts. For expense claims that are not being reimbursed by your agency, you may be able to claim tax relief on these expenses by submitting a claim through HMRC via a P87 or self-assessment. You must, however, retain all receipts as evidence of these expenses. Here is a link to our expenses guide for more information.
How much annual leave am I entitled to as an umbrella employee?
As an umbrella company contractor, your statutory entitlement for annual leave is at least 28 days, including bank holidays. This equates to about 5.6 working weeks of leave from a 52-week year – or 12.07% of your total working hours – and leaves you with a total working year of 46.4 weeks.
In simple terms, for every hour you work, you’ll accrue an extra 7 minutes of holiday entitlement.
Learn more about umbrella company holiday pay in our blog, here.
Will I receive a payslip?
Yes, every time you get paid we will provide you with an electronic payslip which you can easily save and download. All your payslips will also be available in your secure Danbro OnePortal Account.
You can learn more about how your payslip will look in our Guide to Your Pay.
Will you email me my payslip?
Yes, you will be emailed your payslips automatically once they are processed, you can also access them in your secure OnePortal.
Will I Still Pay a Margin if I’m Not Working?
With Danbro Umbrella you will only pay a margin when we process your pay. No payslip means no margin. For more information about our Umbrella solutions please see our blog here: Danbro’s Employment Umbrella – Danbro
Will I Have to Complete a Self-Assessment Tax Return?
If your sole income comes via an umbrella company, there’s no requirement to submit a personal tax return. The same principle applies to permanent employees whose income solely originates from PAYE.
There may be rare cases where HMRC will request a self-assessment tax return though and as an employee of Danbro Umbrella you will have access to our accountancy team who can complete your tax return at a discounted rate. Speak to us today if you are concerned about your tax return. The likelihood of this happening is rare but HMRC do retain the right to request self-assessment tax returns.
How Long Can I Work for the Same Company as a Contractor?
There is no set time limit for how long you can work for a company as a contractor with an umbrella company. As long as you are working or soon to be working you will remain employed.
Will I be Sent a P60 at Tax Year-End as an Umbrella Employee?
Danbro Umbrella will automatically email you your P60.
Do I Need Insurance as a Contractor With an Umbrella Company?
Danbro Umbrella provides both professional indemnity, public liability, and employers liability insurance as standard. If you are concerned that your contract or industry may require additional insurance then please speak to one of our team today and we can advise on the best options.
What Happens When my Assignment Finishes?
Danbro Umbrella provides continuous employment to contractors who are on fixed-term assignments. We will act as intermediaries between you, the contractor, and your agency/end client. With Danbro Umbrella, you’ll remain in employment when your contract ends, or when you’re looking for a new assignment. Your contract will also persist if you’re working on more than one assignment.
You’ll also retain full access to the Danbro Group’s suite of services, should you so choose to benefit from them. From Independent Financial Advice to Specialist Mortgage Brokerage, we’re here for you with whatever you need.
Danbro Umbrella also work with a national network of recruitment agencies, covering all sectors. And if you don’t get paid for a while, we’ll get in touch to see how we can help you.
Compliance Questions
What is the Difference Between Inside and Outside IR35?
IR35’s purpose is to ensure that contractors pay a similar amount of Income Tax and National Insurance Contributions (NICs) as employees would if they were directly providing services to a client.
Inside IR35:
Employee-Like Status: When a contractor or freelancer falls “Inside IR35,” their working arrangement is considered similar to that of a regular employee for tax purposes.
Tax Implications: Inside IR35 contractors are subject to Income tax and National Insurance contributions (NICs) on their earnings. Income tax and NICs are deducted at source, similar to regular employees.
Employment Benefits: Contractors inside IR35 are entitled to employment benefits, including holiday pay, sick pay, and continuous employment.
Less Tax Efficient: Being inside IR35 can lead to a higher tax liability compared to working Outside IR35 because contractors miss out on the tax advantages associated with self-employment.
Outside IR35:
Self-Employment Status: When a contractor or freelancer is categorised as “outside IR35,” their working arrangement is genuinely recognised as self-employed.
Tax Responsibility: Contractors working outside IR35 manage their own taxes and NICs. If they operate through a limited company and pay themselves through a combination of salary and dividends.
Tax Efficiency: Working outside IR35 typically offers greater tax efficiency, as contractors can leverage tax allowances and deductions that employees cannot.
Fewer Employment Benefits: Contractors outside IR35 do not automatically receive employment benefits like sick pay or holiday pay; they need to arrange these benefits separately.
To find out more about Umbrella Companies and IR35, click here.
What Expenses Can I Claim Inside IR35?
You can claim limited expenses when operating within IR35, please contact our dedicated team to discuss your specific situation at umbrella@danbro.co.uk.
Who Determines my IR35 Status?
Your end client will determine your IR35 status.
When Do I Need an IR35 Assessment as an Umbrella Employee?
You should have an IR35 assessment:
- When you start a new contract.
- If your current contract changes significantly.
- Annually or periodically for ongoing contracts.
- When tax laws or HMRC guidance changes.
- When you renew or extend a current contract.
- In case of any dispute or investigations.
Who are the FCSA?
The Freelancer & Contractor Services Association (FCSA), a prominent professional body in the UK, is dedicated to ensuring the compliance and ethical practices within the temporary worker supply chain. To attain this accreditation, umbrella companies must demonstrate that all their internal processes and procedures align with HMRC’s rules and regulations.
Why is FCSA Accreditation so Prestigious?
To attain FCSA accreditation, contractor accountants and umbrella companies must demonstrate their commitment to rigorous standards. Each company undergoes an annual assessment against a published Code of Conduct, independent testing by regulated accountants and solicitors, and annual verification of their ongoing compliance.
What is an Overarching Contract of Employment and Why Do I Need One?
When a contractor is employed through an umbrella company, they typically sign an overarching contract of employment. Let’s delve into the details:
Permanent Employee Status: The overarching contract effectively transforms the contractor into a permanent employee of the umbrella company. This arrangement ensures continuity of employment even when transitioning between different contracts.
PAYE System and Simplified Administration: As a permanent employee, the contractor receives payments through the PAYE system, with tax and National Insurance managed by the umbrella company. This streamlined process simplifies administrative tasks, eliminating the need for individual tax returns if the contractor’s income solely comes from the umbrella company.
Equal Rights: Contractors under this arrangement enjoy the same rights as any other permanent employee. These rights encompass sick pay, statutory parental pay, pension, and holiday pay.
Components of a True Contract of Employment include:
Minimum Hours Guarantee: The contract specifies a minimum number of hours (usually 336 per year, equivalent to one day a week). If there’s a shortfall in a year, the contractor must still receive payment for those hours.
Holiday Pay Provision: The contract complies with the Working Time Regulations, ensuring provisions for holiday pay.
Mutuality of Obligation: This essential component signifies that both the umbrella company and the contractor have reciprocal obligations within the employee-employer relationship.
What is ESM2390?
ESM2390 is a subsection of HMRC’s Employment Status Manual, focusing specifically on umbrella companies. ESM2390 describes how legitimate umbrella companies operate, and how agencies and temporary workers engage with them.
It’s an important document. So, to help you understand it, we’ve taken a look at each section of ESM2390 in detail, providing examples of how it works in practice with additional comments from Helen Broughton MBE DL, the Danbro Group’s CEO. Read the full article here.
Agency & Recruiter FAQs
What is a Preferred Supplier List (PSL)?
A preferred supplier list (PSL), also known as an Approved Supplier List (ASL), is a collection of companies which an organisation would prefer, or mandate, its clients to work with.
Most recruitment agencies will have a PSL of Umbrella companies which they are happy to recommend to all their clients who require a compliant payroll solution.
Why do Recruitment Agencies have a Preferred Supplier List (PSL) of Umbrella Companies?
There are a number of reasons why recruitment agency might have a PSL comprising their preferred umbrella company partners, the most prevalent are listed below:
- To help workers with their payroll and remain compliant with HMRC
- To protect the agency’s reputation. An agency will tend to only recommend those providers who can meet the needs of their clients and not cause unnecessary difficulties or stress.
However, the main reason, particularly from April 2026, that an agency would have a PSL is because of Joint & Several Liability.
This means that in many cases, should a non-compliant umbrella company fail to make the correct deductions for tax & national insurance, the agency in the supply chain would be liable for the shortfall. Learn more about Joint & Several Liability and what it means for your agency, here.
What is the Benefit of a Recruitment Agency Using an Umbrella Company?
There are several reasons that a recruitment agency might choose to use an umbrella company, such as:
Streamlined Payroll and Administration: An umbrella company efficiently manages payroll, including tax deductions and NICs, on behalf of an agency’s contractors. This relieves the agency of their administrative burden, allowing them to focus on core recruitment and client management activities.
Compliance and Risk Management: Umbrella companies possess expertise in tax and employment laws, including IR35 regulations. They play a crucial role in ensuring that contractors engage compliantly, thereby minimising legal risks and penalties associated with incorrect tax classifications.
Attracting Contractors: Many contractors prefer working through umbrella companies due to simplified tax affairs and access to employment rights and benefits. Recruitment agencies offering umbrella services can attract a larger pool of contractors, facilitating easier job vacancy fulfilment.
Competitive Advantage: Providing umbrella company services sets recruitment agencies apart in the market. It demonstrates a commitment to compliance and contractor support, enhancing the agency’s competitive edge.
Contractor Support: Umbrella companies often extend additional services, such as pension assistance and employee benefits. These value-added services improve the overall experience for contractors and foster positive relationships with agency clients.
Reduced Liability: Recruitment agencies can transfer certain employment-related liabilities to the umbrella company. This reduces exposure to legal and financial risks associated with employment disputes or tax non-compliance.
Efficient Payments: Contractors working through an umbrella company receive regular and timely payments, contributing to higher job satisfaction and minimizing payment-related issues.
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