When you register with an umbrella company, you are entitled to holiday pay, but it is often an area that causes a lot of confusion. Continue reading as we explain how holiday pay works through an umbrella company, including how it is calculated and paid to umbrella company employees.
Umbrella companies act as an intermediary in the supply chain of temporary workers for payroll purposes. By joining an umbrella company, a temporary worker (usually a contractor or freelancer) becomes an employee of the umbrella, and the umbrella becomes the employer.
Upon registration, the temporary worker is required to go to their place of work as usual and complete the tasks expected of them. They’ll need to submit the hours they’ve worked by completing timesheets, and these need to be shared with the umbrella and recruitment agency.
The umbrella company receives the worker’s funds from the end client or agency (gross). It is then the umbrella company’s responsibility to make the appropriate deductions to the temporary workers pay before sending them their net salary. The deductions that are made include:
- The umbrella company’s margin
- Income tax
- Employee’s National Insurance
- Employment costs, including Employer’s National Insurance and the Apprenticeship Levy
- Student Loan Repayments (if applicable)
- Pension Contribution (if applicable)
Once the umbrella company has made the necessary and legal deductions, they’ll send the worker their salary with a payslip. Nowadays, it’s common for umbrella companies to have an online portal and/or mobile app. These are modern, efficient ways for umbrella employees to access their payslips and to submit hours.
For more information regarding how umbrella companies work, check out the free resources on umbrellacompanies.org.uk.