Spotlight on contracting: Working with an umbrella company

So, you’ve decided to move into the world of data, technology and analytics contracting. Before you get your first contract there are plenty of questions you need to ask yourself. In our ‘Spotlight on contracting’ blog series we want to answer some of these questions for you.

We recently looked at the main differences between setting up your own limited company or working via an umbrella company.

In this blog, we want to take a further look at umbrella companies.


If your new contract falls within the IR35 regulations that come into force in April 2020, your best option is to be paid via an umbrella company.

What is an umbrella company?

An umbrella company acts as your legal employer, even though you are working for a client. The umbrella company will act as an intermediary between you, the contractor, and the end client. You will submit your timesheets and expenses and the umbrella company will deal with the payment. You will be taxed at source.

Why an umbrella company might be for you?


Umbrella companies are typically considered the “hassle free” option when it comes to paperwork and tax. As you only have to submit timesheets and expenses there is very little admin for you to do.

Ease of pay

You may typically take home less pay working via an umbrella company, rather than a limited company, as you’re paid at source via PAYE. However, this is easier than submitting your own taxes, VAT returns and end of year accounts to HMRC.

The payment process can also be easier via an umbrella company as you don’t have to be chasing invoices.

Going back to perm

Umbrella companies are great if you are working short-term contracts, or if you are planning on going back to permanent employment at some point during your career. As you don’t have to go through the long process of setting up a limited company, umbrella companies can be great for testing if the contract world is for you.

How an umbrella company works

Sign a contract

You’ve decided working via a PAYE umbrella company is the best option for you, so you now need to decide on the umbrella company you want to work with. Before signing a contract with an umbrella company do your research, look a multiple companies and compare each one.

Take a look at Contractor Calculator as they have some great advice on how to choose an umbrella company.

Submit timesheets and expenses

Depending on your contract terms you will submit your timesheets and expenses to the umbrella company weekly or monthly. The umbrella company will invoice the client on your behalf.

Get paid

After any deductions have been taken out, including national insurance, tax and the umbrella company’s fees (also called a margin), you will receive a payslip from the umbrella company and your wages will be paid directly into your bank account.

Working with a recruitment agency

Here at KDR, we pride ourselves on our contractor care. Whether you are contracting via an umbrella company or your own limited company we want to make the process from finding your next contract to getting paid as smooth as possible.

“Can I take this opportunity to thank you for all your help to date. I only wish more companies operated in the way that you do.” – Data Management Contractor

Our team are always here to help!

Making the move to data, technology and analytics contracting is a big decision. Hopefully, we have answered some of your questions about working with an umbrella company.

If you do have any further questions, need advice or are ready to find your first contracting role, Declan is here to help, or you can check out our latest contracting jobs here.

Missed the other blogs in our series? Check them out below:

How do I get paid?

Umbrella company vs limited company

How to set up a limited company

KDR Recruitment is the home of the best data, technology and analytics jobs. For more career advice check out the KDR blog or follow KDR on LinkedIn.

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