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A-Z of choosing an umbrella company – Part 2

We previously brought you Part 1 of our A to Z of choosing an umbrella company – something which can be far from easy in a crowded, and often confusing market.

If you are a recruiter, you’ll want an umbrella company that delivers on compliance and will look after your candidates. Equally you may be a contractor starting out, or shopping around for a better umbrella company experience.

Either way, hopefully our A-Z will help put together a picture of what a good umbrella company looks like.

Your ideal umbrella company – from A to Z

The first part of our A-Z looked at Assignment Rates to Minimum Wage, so here goes with Part 2 – from N to Z.

National Insurance Contributions – NIC

Just like any employee, your earnings through an umbrella company will be subject to the Class 1 Employee’s NIC. This currently stands at 12% after you earn £166 per week.

Your employer is also liable for Employers NI – and this is no different if your employer is an umbrella company.

The rate you are offered to work through an umbrella company should be increased to allow for this. This is known as the “assignment rate” or “charge-out” rate. Read our detailed explanation

Your umbrella company should always be upfront about this and make sure you are happy with your take-home calculation before you proceed with them.

Over-arching employment contract

When you are employed by an umbrella company, you should sign an over-arching contract of employment. Essentially this means you become a permanent employee of the umbrella company, so you have continuity of employment both during and between assignments.

It also guarantees you the same rights as any other permanent employee – statutory sick pay, statutory maternity / paternity pay, pension and holiday pay.


If you are earning more than £10k per year and aged between 22 and state pension age, you should automatically be enrolled into an approved workplace pension scheme after 3 months of employment.

Liquid Friday’s pension scheme is managed by NOW:Pensions. You can transfer this to other employers if you leave us; you can also opt out of pension contributions if you want to.

Quick set up

One of the reasons people choose to contract through an umbrella company in the first place, is because they are looking for a quick set up and minimum administration.

Legitimate umbrella companies will have a number of checks and processes they need to carry out as they are signing you up, but this should be done efficiently and without fuss, and they should keep you informed throughout.

Right to work checks

As an employer like any other, an umbrella company needs to check the ID and Right to Work of everyone they employ. This involves validating an applicant’s passport and any other necessary documentation, such as a visa, to confirm they have a right to work in the UK.

This can normally be done by scanned copies of identity documents and shouldn’t hold anything up.

Service and support

Compliant umbrella companies need to operate on an even playing field, but one of the ways to differentiate a better company is in the quality of their customer experience.

Choose an umbrella that is big enough to be able to work with major recruitment agencies but still provide a friendly, personal service. From your very first dealings with a company, they should be responsive, reliable and professional.


Ok, so tax is a pretty broad heading. Crucially, your umbrella company of choice needs to make sure correct PAYE tax and NI is deducted and paid, so you can get on with what you do best, without worrying about it.

As well as that (and this is especially important for agencies), they should be knowledgeable in relevant areas of tax and employment legislation – including IR35, MSC and AWR, and willing to help you with these if required.

UK owned

A simple one this. Only engage with umbrella companies that are UK owned and registered with no off-shore affiliations.


As with so many things in life, listen to your intuition. You don’t want it to be a chore to connect with your umbrella company – that’s whether you are a contractor or a recruiter. Make sure you get treated as a person, not a number and don’t let them baffle you with jargon.
If you get bad vibes, show them the door!

Work-related expenses

A legitimate umbrella company should have robust expenses procedures, in line with HMRC rules, including compliance with the 2016 legislation around travel and subsistence.

If you are entitled to claim work-related expenses, the company should make it easy to do so, such as providing an online portal to submit claims. They should process your work-related expenses efficiently and ensure that reimbursed expenses are clearly shown on your payslip.


What extra benefits can your umbrella company provide?

Liquid Friday gives you access to a wide range of employee benefits and discounts on everything from cinema tickets and gym memberships to supermarket shopping. Find out more about Liquid Perks


Your umbrella company should provide you with a P60 at the end of each tax year (5th April). This shows how much you have earned and how much tax you have paid in that employment.

If you have claimed expenses over the year, you may also be provided with a P11D form.

At year-end, your umbrella should also be able to provide information on tax codes, rates and allowances for the new tax year.


A good night’s sleep – that’s what you’ll get when you find an umbrella company who will put you first and that you can stick with from contract to contract, without hassle or fuss!