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Common Umbrella Company Questions

Are you unsure how an umbrella company works or still have some unanswered questions? We’ve compiled a list of every frequently asked question, which you may find useful!

If you have a question that you still need answering and think should be added to the list please fill in the contact form.

Bluebird Umbrella Questions

How do I upload my timesheets?

You can upload your timesheets via the My Digital platform. Alternatively, you can download the My Digital app onto your phone which will also give you access to the portal. Once you have been paid you will also be able to find your payslips here.

Where can I access my payslips?

Due to changes in GDPR legislation, we are no longer allowed to email your payslips to you. Your payslips will be uploaded your My Digital account – which you can access by logging in here, or by downloading the My Digital mobile app.

What is Same Day Faster Payments?

The Faster Payments Service means that once Bluebird Umbrella has received funds from your recruitment agency, they are able to pay your salary directly into your bank account the same day.

Who should use Bluebird Umbrella?

Bluebird Umbrella may be the perfect umbrella service for you if any of the following apply to you:

  • You work on short-term contracts
  • You are new to contracting and are unsure if you will be doing it for the long-term
  • You earn less than £15 per hour
  • You are caught by IR35
  • You prefer to do minimal administration

Why is Bluebird Umbrella an online umbrella service?

We recognise that many contractors are paying for an umbrella package which comes with additional extras which are often not needed or used. Therefore, we have chosen to offer a purely online payroll service for contractors who are looking for a straightforward platform from which to get paid.

By keeping our service purely digital and not including a telephone number on our website it has meant we can reduce our operating costs – resulting in savings which we can pass on to you by way of an extremely competitive margin.

Why is there no telephone number?

We have chosen to not include a telephone number on our website and this has not been done in error. We have chosen to keep our service purely digital which means we will be operating via our website, email and live chat. This is so we can reduce our operating costs and offer you an extremely competitive margin.

What is the live chat?

If you have any questions about our service you can speak to a Bluebird Umbrella employee who will happily answer any queries you may have.

If someone is not available as they are dealing with another enquiry please submit your query via the chat along with your name and contact details and we will get back to you as soon as possible.

What is the mobile app?

The mobile app is powered by My Digital and is available to download for free now. The app allows you to view payslips and log the hours you have worked. It’s a marketing leading piece of software and we hope you enjoy using it.

What is the difference between the two Bluebird Umbrella packages?

Bluebird Essential

  • £7.50 per week
  • £25 million free insurance cover – £10 million Employer’s Liability Insurance, £10 million Public Liability Insurance and £5 million Professional Indemnity Insurance
  • 24 hour response time to email enquiries
  • Access to MY Digital portal and mobile app – makes uploading your timesheets and viewing your payslips easy
  • No joining fee, leaving fee or tie in period
  • Minimal ongoing administration – all you need to do is email us your timesheets or submit them via the app
  • You will get Statutory benefits similar to permanent employees – Maternity Pay, Paternity Pay and Sick Pay
  • All payroll, as well as tax and National Insurance deductions, are paid to HMRC on your behalf

Bluebird Elite

  • £10 per week
  • Same Day Faster Payments
  • Same day query response
  • Access to your own dedicated Account Manager who will be your point of contact for any email queries
  • £25 million free insurance cover – £10 million Employer’s Liability Insurance, £10 million Public Liability Insurance and £5 million Professional Indemnity Insurance
  • 24-hour response time to email enquiries
  • Access to My Digital portal and mobile app – makes uploading your timesheets and viewing your payslips easy
  • No joining fee, leaving fee or tie in period
  • Minimal ongoing administration – all you need to do is email us your timesheets or submit them via the app
  • You will get Statutory benefits similar to permanent employees – Maternity Pay, Paternity Pay and Sick Pay
  • Free Bluebird Accountancy trial if you want to set up your own limited company in the future

Umbrella Company questions

What is an umbrella company?

An umbrella company is a PAYE payroll service for contractors and freelancers. The umbrella acts as an employer for contractors and freelancers who work under temporary contracts. The contractor or freelancer (who is seen as an employee for tax purposes) will be paid via the umbrella company who will make the relevant tax and National Insurance Contributions (NIC) and pay them to HMRC on the contractor’s behalf – similarly to a permanent employee.

How does an umbrella company work?

The umbrella company will raise an invoice for the hours you have worked to your recruitment agency or client. From these fees, the umbrella company will then deduct their margin (that covers the administration associated with processing your payroll), the Employer’s NI, Apprenticeship Levy and pension contributions. The money left over after these deductions is known as your ‘Gross Salary’.

Your Gross Salary will then have the Employee’s NI and Income Tax deductions made and you will be paid your net salary directly into your bank account.

Who can use an umbrella company?

Anyone can use an umbrella company as they are designed to accommodate contract workers from any industry, job title or level of experience. However, if any of the following apply to you, you may be perfectly suited to working through an umbrella company:

  • You are caught by IR35 and are working in the public sector, or private sector from April 2021
  • You receive £15 or less per hour
  • You are working on a short-term contract of three months or less or are unsure if you want to make the move to contracting permanently
  • You don’t want the responsibility of being a director of a limited company

Are umbrella companies compliant with HMRC?

Not every umbrella company is compliant with HMRC tax rules and regulations. Some umbrella companies claim you can retain up to 90% of your salary after tax and NI deductions have been made.  The chances are these are likely to be advertising tax avoidance schemes.

Before signing up to an umbrella company, make sure you have checked that they are fully compliant and their processes are regularly audited by a leading industry body (such as the Freelancer and Contractor Services Association – FCSA).

What is my employment status when I work through an umbrella company?

When you sign up to an umbrella company, you enter into a contract of employment and you are now seen as an employee of that company. This means you have access to Employee Benefits and the umbrella will process your payroll with HMRC’s tax system PAYE (Pay As You Earn). This means your tax and National Insurance Contributions are sent to HMRC by the umbrella before you receive your net salary.

Can I use an umbrella company even if I have a limited company?

If your circumstances change and you need to use an umbrella company, it is possible to still keep your limited company open. Your limited company will become dormant and you will be unable to put any payments through for the same assignment.

Bluebird Umbrella understands that circumstances may change and our customers can swap between our umbrella service and Bluebird Accountancy – our sister company who are experts in helping contractors with limited companies.

Can I use an offshore intermediary instead of a UK based umbrella company?

You should never consider using an offshore intermediary and we strongly advise against it because of the penalties you will incur. HMRC is increasing their efforts to penalise contractors who are using, or who have used, offshore intermediaries to reduce their tax burden.

If HMRC discovers you have been using a tax avoidance scheme they will require you to pay back all of the tax that they believe you owe and you could also face additional fines.

Do I need to submit a personal tax return if I am using an umbrella company?

When you become an umbrella company employee your tax and NICs will be automatically deducted and sent to HMRC on your behalf. However, if you have any additional sources of income, they will most likely be untaxed and you will need to report it in a self-assessment tax return. Additional sources of income include:

  • Foreign income above £2,000
  • Rent or income from properties in the UK above the £1,000 threshold
  • Income from savings above the £1,000 threshold for a basic rate taxpayer and £500 for a higher rate taxpayer
  • If you receive income from a settlement, trust or inherit an estate you must complete a self-assessment as tax will be due on this
  • If you have given away or sold a property or investment you may need to complete a tax return and the Capital Gains Tax page depending on how long you have owned the asset and the gain that has been made
  • If your income exceeds £50,000 and you or your partner are entitled to receive Child Benefit you may need to complete a self-assessment as tax may be due

Should I set up my own limited company or operate through an umbrella?

The two most popular ways for contractors and freelancers to get paid is either setting up their own limited company or becoming an employee of an umbrella company. Why not visit our Limited or Umbrella page to gain a better understanding of the benefits of each and which one you may be better suited to.

Limited Company 

You may be better suited to operating through a limited company if any of the following apply:

  • You are earning more than £15 per hour
  • You want more control over your company’s finances
  • You are working on multiple contract roles alongside each other, have taken on one long-term contract or are expecting to be a contractor for a long time
  • You are happy with being the director of your own limited company
  • You are happy to take on more administrative tasks that are associated with setting up a limited company

Umbrella Company 

You may be better suited to becoming an employee of an umbrella company if any of the following apply to you:

  • You only work on short-term contracts
  • You are earning less than £15 per hour
  • You are new to contracting and are unsure if you will be doing it for the long-term
  • You are caught by IR35
  • You prefer a more hassle-free approach and do not want to do any of the administration associated with setting up a limited company

Joining and leaving an umbrella company

What ID do I need to sign up to an umbrella company?

You will be required to supply a form of ID such as your drivers’ licence, passport or national ID card, as well as a proof of address. You will also be required to supply proof of your previous earnings and your tax code via a P45.

For non-EU nationals’, additional documents may be required but this will be clearly detailed once you sign up with Bluebird Umbrella. Additionally, please feel free to email us if you would like any further information.

What information will I need to provide when I join an umbrella company?

The following information is needed when you join an umbrella company:

  • Title
  • Full name on your passport
  • Date of Birth
  • Address
  • Contact number
  • Email address
  • Passport/ID number and the country of issue
  • National Insurance Number
  • National Insurance Code
  • Tax code
  • Student loan (if applicable)
  • Bank/building society name
  • Account number and sort code
  • Assignment start date
  • Hourly/day rate

What do I need to do when I join an umbrella company?

Your umbrella company will take care of all of the work for you! All you need to do is send in the required documents to get set up and your signed timesheets each week/fortnight/month (depending on your circumstances).

How do I submit my timesheets?

You can submit the hours you have worked on the My Digital online portal, or by using the My Digital mobile app.

How much does it cost to join an umbrella company?

Most umbrella companies will only charge you a weekly margin which is to cover their administration. Margins normally range between £15-30 per week.

Please note – some umbrella companies will charge a joining fee, so you need to check prior to signing up to their services to avoid any unwanted additional charges.

How do I leave an umbrella company?

Most umbrella services are free to leave at any time you wish. However, some may charge a small leaving fee so it is always worth double checking before you sign up to their services. You can choose to leave at any time, but it is advised to wait until the completion of your contract.

When you want to leave, you need to notify your umbrella company that you no longer need their services and they will send you a P45. Leaving should be very straightforward.

Payslip and deductions

How will I get paid?

Your umbrella company will pay your net salary directly into your bank account after the required deductions have been made.

What deductions will be made?

You will notice on your payslip that the following deductions will have been made: Employer’s and Employee’s NICs, Apprenticeship Levy, pension contributions (if you are paying into a pension scheme) and Income Tax deductions.

It is worth noting that your payslip will also show that you are being paid Holiday Pay. This is simply a proportion of your salary which is being shown as Holiday Pay as it is a legal requirement that umbrella companies show that they are paying you Holiday Pay.

Will I receive a payslip?

Payslips are accessible by logging into the My Digital Portal or mobile app.

Do I get holiday pay? And why is it showing on my payslip?

It is a legal requirement for umbrella companies to show that they are paying you Holiday Pay and it is worked out at 12.7% of your hourly rate. The Holiday Pay is never actually deducted from you and will be paid to you weekly (or monthly) along with the rest of your salary.

How can I have my holiday pay paid to me and can I change this at any point?

You can have your holiday pay paid to you each time you get paid, or your umbrella company can hold it back and pay it to you in a lump sum at a later date.

You can change your holiday pay method whenever you want. To make this change you will need to notify your umbrella company. If you are a Bluebird Umbrella employee and would like to change your holiday pay method please notify us via email.

What is the Apprenticeship Levy and why do I pay it?

The Apprenticeship Levy is essentially a UK tax on employers which is used to fund apprenticeship training. The Apprenticeship Levy is calculated at 0.5% of salary payments made and must be paid by all employers which meet the criteria.

Your recruitment agency should uplift your salary to take into account this deduction so you are not left out of pocket.

Why am I automatically enrolled in a pension scheme?

Everyone is automatically enrolled into a workplace pension. However, you do have the option to opt out if it is something that you do not want to do, or if you have your own arrangements in place.

Why am I paying both the Employer’s and Employee’s National Insurance Contributions?

Unfortunately, because you are technically not employed by your client – despite carrying out the work for them – they will not pay the Employer’s NI on your behalf. Similarly, despite the umbrella company being seen as your employer (for tax purposes), they are not benefitting from any of the work you are carrying out. Therefore, the Employer’s NI is passed onto you.

To cover this additional deduction your recruitment agency should uplift your salary – so it is not putting you out of pocket.

Why is the illustration I was given different to my actual take home pay?

Umbrella companies can never give you an exact take home figure until you are paid. Therefore, the illustration is only an estimation and should only be used as a guideline. Remember, compliant umbrella companies will never try mislead you.

I don’t understand how my salary is shown on my payslip?

To be compliant with HMRC, umbrella companies must show that you are being paid at least the minimum wage. The number of hours you worked will be shown against the minimum wage rate and then all other funds due to you will be shown as a bonus. This does not affect how much is paid to you, it is just how payslips are presented to remain clear and compliant with HMRC.

What is a bonus on my payslip and why have I got it?

The number of hours you have worked that week or month will be shown against the minimum wage rate. All other funds that you are due will be shown as a bonus.

For example, the 2019/20 National Minimum Wage (NMW) rate is £8.21 per hour for earners over the age of 25. If you are on an hourly rate of £9.25 the additional £1.04 will be shown as a bonus.

Why am I paying too much tax?

If your umbrella company has not received your P45 then you will be put on an emergency tax code. Therefore, you could end up paying the wrong amount of tax.

Umbrella companies will only use the tax codes that HMRC send. If you think the code is incorrect you need to ring HMRC to query or change it.

What do I do if my tax code is wrong?

If you think your tax code is incorrect you should contact HMRC by calling them on 0300 200 3300.

How do I get a tax rebate?

If you think you are due a rebate, you need to contact HMRC to discuss your situation. You will need your NI number and PAYE reference on hand and the number to call is 0300 200 3300.

What time will I get paid?

Once your umbrella company has received your funds from your recruitment agency or client, they are able to process your pay. Usually, you can expect to receive your pay on the same day your umbrella company receives it from your agency or end-client.

Recruitment agency/client

Does it matter if I work for more than one agency?

Using an umbrella company gives you the freedom to work for multiple recruitment agencies on a number of contracts alongside each other – you will be seen as one umbrella employee and your tax code will reflect this.

Why do recruitment agencies use umbrella companies?

Umbrella companies are an easy way for recruitment agencies to minimise their overheads in regards to processing payroll and the administrative burden of managing temporary employees.

I’ve started a new contract through a different recruitment agency, do I need to tell my umbrella company?

Yes – your umbrella company needs to be aware of any changes to your contract. These may include start, end date or contract rate and any changes to your recruitment agency or client’s details.

Umbrella company insurance

What is Employers’ Liability Insurance?

Employers’ Liability Insurance protects your umbrella company against any compensation claims that may be made by contractors in regards to injury or illness obtained in their place of work.

What is Public Liability Insurance?

Public Liability Insurance protects your umbrella company against any claims that could be made by the public if a contractor has caused a personal injury or damage to the property when they are working.

What is Professional Indemnity Insurance?

Professional Indemnity Insurance protects the umbrella company if a client claims that a contractor has not provided the level of service that was agreed. This can include providing inaccurate or misleading advice, poor quality work or incomplete work.

What insurance do I need when I work through an umbrella company?

When you work through an umbrella company it is most likely that they will have Public Liability Insurance, Professional Indemnity Insurance and Employers’ Liability Insurance. These should provide adequate cover for most jobs you do.

It is always worth checking prior to starting an assignment if there is any additional or specialist insurance you may need.

Legislation

What is IR35 and how does it affect me?

IR35 legislation was introduced by HMRC in 2000 as a way of stopping temporary workers from claiming tax benefits by operating through a limited company – when they were not entitled to.

If you are operating through a compliant umbrella company, IR35 legislation does not apply to you because your umbrella company will deduct tax and NI – similar to permanent employees.

What is the 2019 Loan Charge?

The 2019 Loan Charge was introduced as a way for HMRC to punish contractors retrospectively for using disguised remuneration agreements dating back to April 1999 and recoup any tax that is owed.

If HMRC finds that you have used a disguised remuneration scheme you will most likely be required to pay back all the tax they believe you owe as well as possible penalties. Read our Loan Charge blog for more information.

What statutory benefits am I entitled to?

As an umbrella employee, you are entitled to some statutory benefits – similar to permanent employees. Statutory benefits include Maternity and Paternity Pay, Annual Leave and Sick Pay.

Do you know how much you could be taking home if you were to sign up to one of our modern, online umbrella packages?

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