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Contractor umbrella company fees – how much to pay

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

Umbrella company fees – typical 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 are average umbrella company fees?

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 (2017 prices), although there seems to be a wider difference between the monthly fees charged – between £80 and £130 per month as a rough guide.

These are the headline prices charged by some of the better known schemes, 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 decide not to employ the services of a fixed price umbrella scheme, you must find out approximately how much you can expect to pay as a percentage of a typical monthly invoice.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.

You should remember that an umbrella company will not work any harder for you if you are earning £1,000 or £5,000 per month.

Other factors

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

Given that there is not a large difference in the weekly / monthly fees charged by most umbrella companies, we recommend that you consider some other important factors when differentiating between schemes, such as service guarantees, if there are any hidden entry or exit fees, or any ‘perks’ you may gain by joining a specific scheme.

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 providers.

Last updated: 27th August 2018