Umbrella company: what it is and how the pay works

By the HRPricing editorial teamReviewed October 18, 2026How we research and score

An umbrella company is a UK business that employs temporary workers found by recruitment agencies and pays them through PAYE, taking its costs out of the rate the agency pays. GOV.UK says the umbrella deducts its margin, employer National Insurance, employer pension and holiday pay before your gross pay is set. New PAYE rules for supply chains that use umbrella companies apply from April 6, 2026.

Umbrella company: a UK employer, usually used by recruitment agencies, that employs temporary workers and pays them through PAYE out of the assignment rate the agency pays it.

On this page
  1. How an umbrella company works
  2. Example: what is left of a GBP 1,000 assignment rate
  3. Umbrella company vs EOR and staffing agency
  4. What changes from April 2026

How an umbrella company works

The chain has four parties. The client business uses the worker. The recruitment agency finds the work and pays the umbrella company the assignment rate times hours worked. The umbrella company is the legal employer and runs PAYE.

According to GOV.UK, an umbrella employee has the same employment rights as other employees: a written contract, at least the National Minimum Wage (GBP 12.71 an hour at age 21 and over from April 1, 2026) paid on time and in full, and automatic enrollment in a workplace pension if eligible. Holiday pay is either rolled up into every payslip or paid when leave is taken, using a 52-week reference period.

Example: what is left of a GBP 1,000 assignment rate

Say the agency pays the umbrella GBP 1,000 for a week and the umbrella's margin is GBP 25 (an assumption; ask for yours). The rest has to cover employer costs and your gross pay, which here includes rolled-up holiday pay.

One week, GBP 1,000 assignment income (2026 to 2027 rates)
ItemGBP
Assignment income from the agency1,000.00
Umbrella margin (assumed)25.00
Employer National Insurance: 15% above GBP 96 a week111.83
Employer pension: 3% above GBP 120 a week21.65
Gross pay, including holiday pay841.53

HRPricing arithmetic, Oct 2026. Rates from GOV.UK rates and thresholds 2026 to 2027 and workplace pension minimums (GBP 6,240 a year lower limit = GBP 120 a week). Apprenticeship Levy ignored; it applies only to pay bills over GBP 3 million.

So about 16% of the agency rate goes before your gross pay is even set. Your own income tax, employee National Insurance and pension come out of the GBP 841.53. GOV.UK says these deductions must appear on a reconciliation statement; check it against the rate you agreed.

Umbrella company vs EOR and staffing agency

  • Umbrella company: employs short-term agency workers. The agency, not the client, picks it. The worker usually bears employer costs out of the assignment rate.
  • Employer of record: employs a long-term hire on your behalf, and you pay the employer costs on top of salary plus a fee, such as Multiplier at $499 or Deel at $599 per employee a month (checked October 16, 2026). See what an EOR does and UK employment costs through an EOR.
  • Staffing agency: places and employs temps itself; see EOR vs staffing agency and temp agency.

The US has no direct equivalent. The closest match is a staffing firm that puts a temp on its own W-2 payroll, or a contractor of record for independent contractors.

What changes from April 2026

GOV.UK says the government is introducing new PAYE rules for labor supply chains that include umbrella companies from April 6, 2026, and is working to bring umbrella companies into the legal definition of an employment business. The guidance page we read was last updated September 17, 2025 (more than a year old) and does not give the detail, so ask your agency who is responsible for PAYE in your chain. For UK pay levels, see average salaries in the UK.

Frequently asked questions

What is an umbrella company?
An umbrella company is a UK business that employs temporary workers found by recruitment agencies and pays them through PAYE. The agency pays the umbrella an assignment rate, and the umbrella deducts its margin and employer costs before paying the worker (GOV.UK).
Is an umbrella company the same as an agency?
No. The recruitment agency finds the work and pays the umbrella company. The umbrella company is the employer that runs payroll and issues payslips.
Who pays employer National Insurance with an umbrella company?
GOV.UK lists employer National Insurance as a deduction from the assignment rate, along with the margin, employer pension and holiday pay. In practice it comes out of the money paid for your work. From April 2026 the employer rate is 15% above GBP 5,000 a year.
Do umbrella company workers get employment rights?
Yes. GOV.UK says umbrella employees have the same employment rights as other employees, including at least the National Minimum Wage.
Do US companies use umbrella companies?
Not under that name. In the US, a staffing agency usually puts temps on its own W-2 payroll, and an employer of record hires long-term staff abroad, with published fees of $99 (Native Teams, whose help center says EUR 99) to $699 (Oyster) per employee a month (checked October 16 and 18, 2026).
Sources (10)
  1. GOV.UK: Working through an umbrella company (page shows last updated Sep 17, 2025; checked Oct 18, 2026)
  2. GOV.UK: Rates and thresholds for employers 2026 to 2027 (last updated Sep 1, 2026; checked Oct 16, 2026)
  3. GOV.UK: National Minimum Wage and National Living Wage rates (checked Oct 16, 2026)
  4. GOV.UK: Workplace pensions: what you, your employer and the government pay (checked Oct 16, 2026)
  5. Multiplier: Multiplier pricing (checked Oct 16, 2026)
  6. Deel: Deel pricing (checked Oct 16, 2026)
  7. Payoneer Workforce Management (Skuad): Pricing (checked Oct 16, 2026)
  8. Oyster: Oyster pricing (checked Oct 16, 2026)
  9. Native Teams: Pricing (checked Oct 18, 2026)
  10. Native Teams: Pricing plans, features, benefits and how they work (help center) (checked Oct 18, 2026)

This page is general information, not tax, legal or accounting advice. Rules and rates change, so check the official source linked above before you file or sign a contract. Read our disclaimer.