What is an Umbrella Company

An umbrella company is a company that acts as an employer for temporary workers, such as contractors and freelancers. 

Umbrella companies are responsible for managing the administrative tasks of their workers, including payroll, taxes, and benefits. In this blog post, we will explore:

  • What an umbrella company is.
  • How an umbrella company works.
  • Benefits of umbrella companies for temporary workers.

What is an Umbrella Company?

An umbrella company is a type of employment intermediary that provides administrative services to contractors and freelancers. These services can include payroll processing, tax calculations, and invoicing clients.

The umbrella company acts as the employer for the contractor or freelancer, and the contractor or freelancer becomes an employee of the umbrella company.

How Does an Umbrella Company Work?

When a contractor or freelancer joins an umbrella company, they enter into an employment contract with the umbrella company. The contractor or freelancer provides services to their clients, and the umbrella company pays them a salary based on the hours worked.

The umbrella company is responsible for deducting taxes and other statutory deductions from the contractor or freelancer’s salary, and for paying these to the relevant authorities.

Benefits of Using an Umbrella Company

1. Simplified Administration: One of the main benefits of using an umbrella company is that it simplifies the administrative tasks associated with contracting or freelancing. The umbrella company takes care of payroll, taxes, and other administrative tasks, leaving the contractor or freelancer free to focus on their work.

2. Access to Benefits: Because the contractor or freelancer becomes an employee of the umbrella company, they may be eligible for benefits such as sick pay, maternity leave, and pension contributions.

3. Improved Financial Security: Contractors and freelancers who work through an umbrella company have the security of being paid as an employee, rather than having to chase invoices from clients. The umbrella company also ensures that taxes and other statutory deductions are paid correctly and on time, reducing the risk of penalties or fines.


In conclusion, an umbrella company provides a valuable service to temporary workers, simplifying administrative tasks and providing access to benefits. By acting as an employer for contractors and freelancers, umbrella companies help to improve financial security and reduce the administrative burden of working independently.