All You Need to Know About Umbrella PAYE Scheme

Introduction to Umbrella PAYE

Financial considerations is one factor to be considered  by the contractors before they choose and sign an agreement with the Umbrella companies. Umbrella companies charges certain fees to the contractors. Umbrella company charges the fees in two structures. A monthly or a weekly fee. A fixed fee structure is charged by the Umbrella Company for making use its services. Umbrella PAYE scheme always have a fixed fees structure. A percentage of the invoice is valued as a fee.

How does Umbrella PAYE company work?

Here are some details on how the Umbrella PAYE scheme works and what the contractors can expect when they sign into this fixed scheme. After the umbrella company is chosen as per your reference, as an Umbrella company employee, you need to sign and provide P45 and P46 forms along with the personal details, bank account and national insurance number of yours. Once this is submitted, the Umbrella PAYE firms confirms and signs the contract with the recruitment agency along with the sign of contract for the employee of the Umbrella company.

After the contract/agreements are signed, as an employee you start to submit the timesheet details to the umbrella company. This can be done online easily. The umbrella company sends an invoice to the agency and agency pays the sum total to the umbrella company. One has to confirm how often the payments has to be done, once or more every month.

The contract agency will be paid by the Umbrella company as per the agreed time into their bank account submitted. The invoice amount minus the income tax, national insurance, deductions, umbrella fees are paid. Payment is made via BACS or FP or CHAPS. Same day payment might have extra charges with CHAPS. With FP or Faster Payments, one might have to wait for few days till the funds are cleared.

The contractor also have to submit the expenses claims to the company. Only certain expenses have tax relief. The company processes these expenses at a fixed rate sometimes without a receipt. So it is essential to read the guide to expenses carefully to know about it.


There are so many Umbrella PAYE companies in the UK market. One has to spend a lot of research time before you choose the company and sign the agreement. The companies differ the fee charges and the customer service. Apart from the umbrella fee, the net take home payments is fixed and never changes with any Umbrella PAYE companies.