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Contractor umbrella company fees - how much to pay

Published on Jun 16, 2009 |

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Most IT contractors consider price to be an important factor when choosing an umbrella scheme. In this article we look at the typical fees charged by umbrella companies, and why you should consider other factors before signing up.

Umbrella company fee structure

There are two main types of charging structure:

1. A weekly / monthly fee. You will be charged a fixed fee by the umbrella company for using its services. Most PAYE umbrella schemes have a fixed-fee structure. Make you you know what the gross fee is, as well as the fee net of tax. You can read more in our article on comparing umbrella company fees.

2. A proportion of the value of your invoices. An umbrella might deduct a fixed percentage of any invoices raised as a fee. Sometimes the actual value of the fee may be capped.

How much do umbrella companies charge?

Typically, you will be charged a weekly or monthly fee for using an umbrella company.

Many of the biggest umbrella companies charge between £25 and £30 per week, however there is a bigger difference when you compare monthly fees. Generally, monthly fees are lower than weekly fees (when averaged out). Monthly fees for the leading firms seem to range from around £80 to £120 per month.

These are typical prices, and naturally you'll find some companies who charge less or more on average.

It's worth remembering that price is just one factor you should consider before you choose a contractor umbrella company.

If you opt for a company which charges a percentage of the value of your invoices, you could potentially pay a lot more than you would with a fixed fee company. However, many companies cap the amount they charge.

If you don't go for a fixed fee umbrella, it is absolutely essential that you know roughly how much you will be paying via a percentage fee umbrella company, based on the value of a typical invoice.

If you are a high-earning contractor, you could be seriously out of pocket if you don't do your sums before you join an umbrella scheme.

After all, the umbrella doesn't work any harder if you're earning £2,000 or £10,000 per month!

Other factors

There are many other important factors you should consider before joining an umbrella scheme.

With just a few pounds difference in the fees charged by many of the leading umbrella companies, you should also look at things like: how established is the scheme?, are there any service guarantees?, are there any 'hidden costs'?, what additional benefits does the scheme provide?, etc.

Make sure you also seek recommendations from other contractor colleagues who have been in the game for some time.

For more tips, try our popular guide - 15 things to help you choose an umbrella company. Also see our growing list of UK umbrella companies.