Umbrella Myths

Umbrella Myths

Umbrella companies play an important role in supporting contractors, providing all

employment rights and ensuring tax and NICs are paid. However, there are numerous misunderstandings about how umbrellas work in practice. As an FCSA regulated umbrella company we pride ourselves on compliance and service.

Here we look at some of the common misunderstandings:


Myth 1 – Employers National Insurance and other employment costs should not be deducted

This deduction should be factored into calculating the assignment rate, i.e. it is in addition to workers’ gross pay. All employers are legally required to pay employers national insurance, as well process employee deductions.

Compliant Umbrellas have always been transparent about how they calculate gross pay, i.e. that employment costs are deducted from the assignment rate. These deductions does not constitute part of the employee’s pay.

If a worker is paid via an agency or hirer directly, the employer’s national insurance (and associated employment costs) will be paid in addition to the gross pay – with Umbrella it forms part of the assignment rate.

Umbrellaphant explain and provide illustrations of these deductions prior to the employment contract being entered into.


Myth 2 – that umbrella firms are a “scam”

Umbrella firms have never been a scam, they offer a legitimate contractor solution that enables individuals to receive all benefits of employment whilst working on a numerous different assignments. Umbrellaphant provide a clear contract of employment, all statutory rights and benefits, and transparency in how a contractors pay is calculated.


Myth 3 – no advantages to working for an umbrella

Contractors working for an umbrella firm are employed by that umbrella firm, and therefore, have access to all statutory rights and benefits of employment. This includes annual leave, maternity, paternity, sick pay and pension contributions.


Umbrellaphant offers a compliant and service focussed solution to ensure contractors are paid correctly. Get in touch for more information.