An umbrella company is a third-party organisation that acts as an intermediary between a worker—such as a supply teacher or support staff—and a recruitment agency, handling payroll, tax, and employment benefits.
When paid through an umbrella company, a worker becomes its employee rather than being paid directly. The umbrella company processes payroll, deducts taxes and National Insurance (NI), and charges a fee for its services.
At first glance, umbrella companies may seem like a hassle-free way to receive payment, often promoting attractive headline rates. However, after deductions and fees, the actual take-home pay can be significantly lower than expected.