How An Umbrella Company Works

What is an Umbrella Company?

An umbrella company is a company that employs freelance workers who may work on numerous different assignments, at various locations, either through agencies or directly for end-clients. The umbrella company enters into an employment contact with the worker and a service contract with the agency or end-client.

An umbrella company differs from a personal service company in that the freelance worker does not own shares in the umbrella company and is one of many such workers employed by the company.

By working in this way, the agency or end-client is able to avoid a range of legal issues including the terms of the Agency Workers Regulations and the Employment Agency Regulations.

Terms and Conditions of Employment

The terms and conditions of employment are more or less standard regardless of which umbrella company you select to work through as a freelance worker.

You become an employee of the umbrella company and not a director or shareholder, unlike with a personal service company. You will receive your income as salary (plus expenses if applicable) and not as dividend.

Your contract is with the umbrella company and not with the agency or end-client. The terms of your contract of employment will be largely in line with the terms of any other contract of employment (eg disciplinary, health and safety, etc), but with certain differences to take account of the particular circumstances.

Please see the article ‘terms and conditions of employment’ for more information.

Working through Competex Umbrella Ltd

When you work through Competex Umbrella Ltd (CUL), you work as an employee of CUL under a contract of employment with CUL.

You will negotiate the terms of your assignment with the agency or end-client on behalf of CUL, but the resulting contract will be between CUL and the agency or end-client. Having negotiated your fee and any arrangement for expenses you will need to advise CUL so that this detail can be incorporated into the contract with the agency or end-client and into your salary payment structure.

At the end of the month (or other agreed period) you will need to complete a time sheet setting out the days (or hours) worked and any expenses due, and arrange for this to be signed off by the end-client. The details must be notified to the agency or to CUL depending on circumstances, an invoice will be raised and CUL will receive payment.

CUL will pay you two working days after receipt of funds from the agency or end-client. It is therefore in your best interest to send in your time sheet punctually, and indeed to chase the client for payment, particularly if you are working directly for an end-client and you are in a position to do so.

Amy FowlerHow an Umbrella Company Works