What is an umbrella company?

An umbrella company is a UK PAYE employer that contracts with a recruitment agency or end-hirer and employs the worker for tax purposes. The umbrella receives an assignment rate from the agency, deducts its margin and the employment costs (employer NI, Apprenticeship Levy, holiday pay accrual, employer pension), then runs the remaining amount through PAYE to produce the worker's net pay.

Is my umbrella company required to give me a Key Information Document?

Yes. Under the Conduct of Employment Agencies and Employment Businesses Regulations as amended, the recruitment agency must provide a Key Information Document (KID) before you agree to terms. It must set out the assignment rate, who pays you, how deductions are calculated, the resulting illustrative take-home, holiday pay treatment and any fees. If you did not get one, ask the agency in writing.

Can the umbrella deduct employer NI from my pay?

The contractual position is that the umbrella receives an assignment rate that is intended to cover both the worker's pay and the employment costs. In practice that means employer NI, Apprenticeship Levy and the umbrella margin reduce the headline assignment rate before your gross PAYE pay is set. This must be disclosed clearly on the KID and itemised on your payslip. Hidden deductions or undisclosed margins are a red flag.

What is rolled-up holiday pay and is it allowed?

Rolled-up holiday pay means the holiday entitlement is paid alongside each weekly or monthly payslip rather than accrued and paid when leave is taken. Following changes to the Working Time Regulations effective from 1 April 2024 onwards, rolled-up holiday pay is now lawful for irregular-hours and part-year workers if shown as a separate, clearly identified line at no less than 12.07% of pay for that period. For other workers, holiday should be accrued and paid when leave is taken. Either way, the treatment must be transparent on the payslip.

When should I escalate to HMRC?

Escalate to HMRC if you suspect disguised remuneration (a "loan", "credit" or "advance" replacing some of your salary), an offshore payer, a take-home percentage that is suspiciously high, or deductions that do not appear on your payslip. Use the HMRC "Report tax fraud or avoidance" route at gov.uk. For National Minimum Wage concerns where deductions take pay below the statutory rate, report via Acas or the gov.uk minimum-wage complaint route.

Educational guidance only — not regulated tax, legal, financial or payroll advice. Verify with HMRC, ACAS or a qualified adviser before acting on anything in this guide.

UK · Guides · Umbrella worker rights

Umbrella worker rights — UK 2026 guide

If you are paid through an umbrella company you are a UK PAYE employee — with the same statutory rights as anyone else on PAYE, and a few extra protections specific to the agency / umbrella chain. This guide walks through what you are entitled to in 2026, how to read an umbrella payslip, the red flags to watch for, and how to escalate if something is wrong.

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What an umbrella company actually is

An umbrella company is a UK PAYE employer that sits between the worker and the recruitment agency (or, less commonly, the end client). The umbrella employs you for tax purposes. The agency pays the umbrella an assignment rate — a single hourly or daily figure intended to cover both your gross PAYE pay and the employment costs that any employer would otherwise pay on top (employer National Insurance, the Apprenticeship Levy, employer pension and the umbrella’s own margin). From that assignment rate the umbrella deducts the employment costs, sets your gross PAYE pay, runs PAYE income tax, Class 1 employee NI, any student loan and any pension contribution, and arrives at your net pay.

Crucially, the assignment rate is not the same as your gross pay. That distinction trips up many first-time umbrella workers, and it is exactly the distinction that the Key Information Document is designed to make clear before you sign.

Why workers end up on umbrella in the first place

Three common drivers:

Off-payroll working rules (IR35). Since the public-sector reform in 2017 and the private-sector reform in 2021, many end-clients have decided as a matter of policy that they will only engage limited-company contractors via umbrella PAYE. This is a risk-management choice on the client’s side; it shifts the IR35 determination off their books.
Multiple short assignments through one agency. The umbrella becomes a single continuous employer across multiple assignments, which means a single tax code, a single pension scheme and one P60 at year-end.
Agency policy. Some agencies will only pay through a preferred-supplier umbrella list. Note: you should normally have a choice of umbrella from any genuine PSL.

Your Key Information Document

Before you agree terms with an agency that intends to pay you via an umbrella, the agency is required to give you a Key Information Document (KID). The KID exists because the difference between the headline assignment rate and the take-home pay is otherwise easy to miss until your first payslip. The KID must set out, at minimum:

Who will employ you (the umbrella) and who will pay you (also the umbrella).
The assignment rate paid by the agency to the umbrella.
The expected employment costs (employer NI, Apprenticeship Levy, employer pension where applicable) and the umbrella margin.
The resulting gross PAYE pay and an illustrative take-home figure.
How holiday pay will be treated — accrued and paid on leave, or rolled-up on every payslip.
Any fees that will reduce your pay (joining fees, exit fees).

If you did not receive a KID, ask the agency for one in writing and keep their reply. You can compare the KID figures to your actual payslip with the agency worker payslip checker.

Holiday pay — accrued vs rolled-up

Every UK worker is entitled to at least 5.6 weeks of paid holiday per leave year. For full-time workers that is 28 days. For umbrella workers the holiday entitlement is usually expressed as a percentage of pay — 12.07% of working time, which is the standard conversion of 5.6 weeks of holiday into a percentage of the remaining 46.4 working weeks.

There are two lawful ways to deliver holiday pay through an umbrella:

Accrued holiday pay. The umbrella sets a proportion of your pay aside each period and pays it when you actually take leave. The accrual must be tracked and visible on your payslip.
Rolled-up holiday pay. Following changes to the Working Time Regulations effective from 1 April 2024 onwards, rolled-up holiday pay is lawful for irregular-hours and part-year workers if shown as a separate, clearly identified line at no less than 12.07% of pay for that period.

Whichever your umbrella uses, holiday pay must be visible on the payslip. A payslip with no holiday line at all is not compliant.

Sick pay and pension auto-enrolment

As a PAYE employee of the umbrella you are entitled to Statutory Sick Pay (SSP) from the umbrella when you meet the eligibility conditions. Many umbrellas pay only the statutory minimum, so check the contract for any enhanced company-sick-pay scheme.

The umbrella must also operate pension auto-enrolment in line with The Pensions Regulator’s rules. Once you meet the eligibility criteria — broadly, aged 22 to State Pension age and earning above the auto-enrolment trigger — you will be enrolled automatically, with both an employer contribution and your own contribution deducted at source. You can opt out, but you should not have to chase the umbrella to be enrolled in the first place. Three months on the payroll with no employer pension contribution and no opt-out form completed is a red flag.

Common payslip red flags

The umbrella sector contains a minority of operators running schemes that range from non-compliant to outright tax avoidance. These are the patterns that should make you stop and ask questions.

A "loan", "credit", "advance" or "trust payment" replacing some of your salary: Classic disguised-remuneration pattern. The umbrella runs a small portion of pay through PAYE and pushes the rest through a non-taxable mechanism so the take-home looks unusually high. HMRC has been pursuing both promoters and individual workers under the Loan Charge regime; do not accept any explanation that involves a sum being paid "outside PAYE".
Offshore payer or offshore bank account: If your payslip shows a UK umbrella but the money actually arrives from an entity in the Isle of Man, Jersey, Cyprus, the UAE or another jurisdiction, that is a serious warning sign. Legitimate UK PAYE pay arrives from a UK-resident employer with a UK PAYE scheme reference (the "Employer PAYE reference" on your P60).
Opaque "margin" or "company costs" line: The umbrella margin must be disclosed before you sign and itemised on the payslip. A line that simply reads "company deductions" or "agency costs" with no breakdown is not compliant. You are entitled to know exactly what is being kept and why.
No employer NI line on the payslip: Employer National Insurance is a real cost that legitimate umbrellas must show. If the payslip is silent on employer NI, the umbrella is either pocketing it, mislabelling it under another line, or genuinely not running PAYE properly. All three are problems.
Take-home that looks too good to be true: A genuine PAYE umbrella running on a UK assignment rate cannot pay a higher percentage take-home than HMRC PAYE arithmetic allows, after the umbrella has taken its margin and the employment costs. If a scheme promises 80%+ retention on a £50k+ contract rate, it is not operating ordinary PAYE.
Holiday pay missing or impossible to find: You are entitled to 5.6 weeks of paid holiday per year as a UK worker. Whether your umbrella accrues holiday or pays it rolled-up alongside each payslip, it must be visible. A payslip that shows no holiday line at all is a problem.
Pension auto-enrolment never appearing: Once you meet the eligibility criteria (broadly: aged 22 to State Pension age, earning above the trigger), the umbrella must auto-enrol you and run an employer contribution. If three months of payslips show zero employer pension contribution and you have not opted out, raise it formally.

Action steps if something looks wrong

Get the KID and three months of payslips together. You will need them for every step that follows.
Run the payslip through the umbrella checker. That gives you the line-by-line variance against the expected PAYE / NI maths and flags any obvious red flags.
Raise it with the umbrella in writing. Email, not phone — you need a written record. Reference the KID and the specific lines on the payslip you cannot reconcile.
Raise it with the agency. The agency is legally responsible for the KID and for the integrity of the supply chain. They have a strong incentive to switch umbrellas if one is misbehaving.
If still unresolved, escalate. HMRC for tax fraud / disguised remuneration. ACAS or the gov.uk minimum-wage complaint route for pay falling below the National Minimum Wage. The Pensions Regulator for auto-enrolment failures.

Frequently asked questions

What is an umbrella company?: An umbrella company is a UK PAYE employer that contracts with a recruitment agency or end-hirer and employs the worker for tax purposes. The umbrella receives an assignment rate from the agency, deducts its margin and the employment costs (employer NI, Apprenticeship Levy, holiday pay accrual, employer pension), then runs the remaining amount through PAYE to produce the worker's net pay.
Is my umbrella company required to give me a Key Information Document?: Yes. Under the Conduct of Employment Agencies and Employment Businesses Regulations as amended, the recruitment agency must provide a Key Information Document (KID) before you agree to terms. It must set out the assignment rate, who pays you, how deductions are calculated, the resulting illustrative take-home, holiday pay treatment and any fees. If you did not get one, ask the agency in writing.
Can the umbrella deduct employer NI from my pay?: The contractual position is that the umbrella receives an assignment rate that is intended to cover both the worker's pay and the employment costs. In practice that means employer NI, Apprenticeship Levy and the umbrella margin reduce the headline assignment rate before your gross PAYE pay is set. This must be disclosed clearly on the KID and itemised on your payslip. Hidden deductions or undisclosed margins are a red flag.
What is rolled-up holiday pay and is it allowed?: Rolled-up holiday pay means the holiday entitlement is paid alongside each weekly or monthly payslip rather than accrued and paid when leave is taken. Following changes to the Working Time Regulations effective from 1 April 2024 onwards, rolled-up holiday pay is now lawful for irregular-hours and part-year workers if shown as a separate, clearly identified line at no less than 12.07% of pay for that period. For other workers, holiday should be accrued and paid when leave is taken. Either way, the treatment must be transparent on the payslip.
When should I escalate to HMRC?: Escalate to HMRC if you suspect disguised remuneration (a "loan", "credit" or "advance" replacing some of your salary), an offshore payer, a take-home percentage that is suspiciously high, or deductions that do not appear on your payslip. Use the HMRC "Report tax fraud or avoidance" route at gov.uk. For National Minimum Wage concerns where deductions take pay below the statutory rate, report via Acas or the gov.uk minimum-wage complaint route.

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Last reviewed

Last reviewed: 16 May 2026

Next review: 6 April 2027

Reviewed each tax year and sooner if HMRC, BEIS or the Working Time Regulations change materially.

Educational guidance only — not regulated tax, legal, financial or payroll advice. Always verify with HMRC, ACAS, The Pensions Regulator or a qualified adviser before acting.