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A to Z of choosing an umbrella company

Sadly there’s no such thing as a dating app to match you with your perfect umbrella company (Liquid Friday – swipe right!) and with so many to choose from these days, you really need to do your homework.

We have put together an A to Z of choosing an umbrella company for contractors and agencies alike.

Some of these are concrete necessities while some are some are nice-to-haves, but hopefully they will help you tick all the boxes and provide some useful information along the way.

Find your ideal umbrella company – from A to Z

Here goes with Part 1, from A through to M!

Assignment rate

Also known as “charge out” rate, this is the rate an agency pays an umbrella company. It includes Employers NIC and other employment costs which the umbrella company has to pay out before they pay the contractor. Therefore the umbrella assignment rate is higher than the rate offered on agency PAYE, although the take-home pay should be comparable.

Basic personal allowance

This is the amount you can earn before you start paying tax. For 20/21 this amount is £12,500.


Umbrella companies have to comply with a ton of legislation and regulations, and unfortunately there are a few bad apples who don’t. No legitimate umbrella will cut corners with compliance, because it would put the whole supply chain in jeopardy. Check out our compliance checks and processes.

Due diligence

Following neatly on from the last point, due diligence is basically the groundwork you need to do to ensure that the umbrella company you are dealing with is operating compliantly.

One way to do this is to choose an FCSA-accredited umbrella company, as you can be assured they will have undergone the toughest testing in the industry.

Employment rights

When you are employed by an umbrella company, you have the same rights as any other employee, including holiday pay, statutory sick pay and maternity / paternity pay.


Working through an umbrella company is a very flexible way of contracting, because it means you are not tied to any one agency or end client.

Gross payment

From the amount an agency pays across to the umbrella company, employment costs and the umbrella margin is deducted. What is left is the gross payment, which is subject to PAYE tax and Employees NI.

Holiday pay

When you are employed by Liquid Friday, you can either choose to have your holiday pay retained for when you want to take time off, or paid out with your wages every week.


Check that your umbrella company provides sufficient insurance cover. Types of cover include Public Liability, Professional Indemnnity, Employers Liability and Personal Accident.
Read more about our insurance cover


If your umbrella company baffles you with complicated terminology, maybe it’s time to look elsewhere. It’s their job to understand all that – not yours. Choose a provider that makes things easy.


While a good umbrella company makes things as simple as possible, they should still know what they are talking about! There’s no such thing as a stupid question so get in touch with the Liquid Friday team if there is anything you are unsure about.

Loan schemes

These are tax avoidance schemes that often label themselves umbrella companies. They work by paying a large part of income as a loan in order to avoid tax. HMRC are rapidly catching up with users through the Loan Charge, so give any such scheme a very wide berth.

Minimum Wage

Compliant umbrella companies ensure that the National Minimum Wage and National Living Wage is protected. For 2019/20 the National Minimum Wage and National Living Wage for over 25s is £8.21.

We’ll leave it there for now, but stay posted for Part 2 of our umbrella A to Z!

This article was originally published on 25th October 2019 and updated on 25th January 2021.