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2 minute phrasebook for umbrella company newbies

Whether you are new to contracting generally, or just new to working through an umbrella company, we are here to make things as easy as possible – including making sense of the common terms you’ll hear being thrown around.

Here’s a quick guide to some of the standard lingo!

Umbrella company

An umbrella company is an employer for contractors or agency workers on Multiple Assignments with varying End Clients.

Umbrella companies pay you as a PAYE employee, deducting tax, National Insurance and their margin.

Sometimes (especially in certain areas of the media) the term “umbrella company” is used as a catch-all term to include some non-compliant payroll schemes, so make sure your umbrella company is paying you in the way we have described.

Assignment rate

The assignment rate (or “charge out” rate) is the rate an agency pays an umbrella company for your services. It includes Employers NIC and other employment costs which the umbrella has to pay out before they pay you.

Therefore the umbrella assignment rate is higher than the rate you would be offered to be paid directly as a permanent employee.

Preferred Supplier List (PSL)

A PSL is a list of third party suppliers, including umbrella companies, which your recruitment agency has agreed to work with. Companies on the list will have had to demonstrate a level of compliance and meet certain criteria, in order to protect the agency and its workers from the risks of bad practice.


The Freelancer and Contractor Services Association – FCSA – is the UK leading professional membership body for compliant umbrella companies, limited company accountants and CIS payroll providers.

Often recruitment agencies will choose to only include FCSA accredited member companies on their PSL, giving reassurance to contractors.


Expenses are any costs you incur while performing the duties of your contract. Some of these may be claimed back and reimbursed depending on the type of assignment you are on and whether it is subject to supervision, direction and control (SDC).

Ask our Expenses Team how this could affect you.


Tax legislation aimed at tackling tax avoidance. As an employee of Liquid Friday (or any umbrella company) you don’t have to worry about it, as it only affects limited company contractors. Having said that , IR35 is always a hot topic in contractor circles, so it’s worth knowing a bit about it.

Limited company / Personal Service Company (PSC)

A limited company is a legal entity which owns its own assets and is responsible for its income, outgoings and taxation. A common type of limited company used by contractors is a Personal Service Company – PSC, where an individual provides their services through the limited company.
One of the biggest considerations of working in this way is IR35 (see above).

Agency Workers Regulations (AWR)

A set of regulations designed to ensure contractors and temporary workers are paid and treated fairly.

Under the AWR, agency workers who have been on assignment for 12 weeks must receive equal pay and conditions to permanent staff doing the same job.

Contractor loan charge

A controversial retrospective tax introduced in April 2019 which impacts contractors who were paid through so-called “disguised remuneration schemes”.

The schemes were promoted to contractors on the basis that they took the majority of their earnings as a loan, without being subject to tax and national insurance. Such schemes are still around – avoid at all costs!

Got questions? That’s what we’re here for!

Whether you are just starting out with Liquid Friday or you go back a long way with us, the team is always here to help you.

Email hello@liquidfriday or save our number to your favourites – 02392883300