I'm new to contracting

Deciding on a career change can be challenging and becoming a contractor even more so. Contracting can offer many benefits such as an increased earning potential, flexible working hours and job autonomy. Many people are put off by the idea of taking the first step to becoming their own boss because they feel that they don’t have enough knowledge about contracting or how it works in practice.

We’ve created our Umbrella service to help you get started with contracting in the UK! Our knowledgeable staff will give you all the information you need to know about starting out as a contractor, from creating your timesheets through our online portal, understanding your salary sacrifice options, through to getting paid!

Most Umbrella workers find work through a recruitment agency though there are still some who have long-established relationships with end-clients and will arrange their own work directly. If you are just starting out, finding work through a recruitment agency is the common route to getting your contracting career underway.

As a contractor you want to get the best rate possible for your work, but it can be hard to know what that is.

Once you have found your first assignment, we’re on had to help ensure you are set-up with us. We will confirm your agency details, ensure we have an agreement with your agency to have you work through us, and you will have your own online portal to create your first timesheet.

Our online system is straightforward and most new Umbrella workers can find their way around it very quickly. To give you an idea of how No Worries Umbrella works, for a typical week you would;

(1) Create your Timesheet using our online portal. We are notified automatically once your Timesheet is complete;

(2) We then create an Invoice based on your contract rate and hours worked, and will send that across to your agency for payment. You will get an SMS from us each time we send your Timesheet across for invoicing.

(3) Once payment has been received from your agency, we check it is correct, and then process your payroll (all in the same day). Once payroll is complete (it only takes a few minutes) we transfer your net pay from our business bank bank directly into your personal account. We will also email you a payslip summary AND send you an SMS message so you know once your payroll has been processed. That’s about it!

Often though, the burning question for a lot of new contractors is “How much will I get paid?”. Luckily for you, our Take Home Pay Calculator can give you all the answers. See it in action below.

Take Home Pay Calculator

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      How our Umbrella company works


      An umbrella company acts as an employer for contractors who don’t want to deal with the administration of being self- employed, or who are not able to utilise a personal service company.

      No Worires Red Umbrella is an umbrella company that acts as your employer where typically your employment status under employment law (Employment Rigts Act 1996) is a worker where you work and are paid for multiple assignments or projects, with end clients or agencies. This means that we operate PAYE/NIC normally on all your employment income, and that you are entitled to statutory worker rights as listed below. You will not be engaged through any other intermediary or third-party, your contract will be directly with No Worries Red Umbrella Ltd.

      The traditional umbrella model caters to skilled workers who opt to be employed through an umbrella company rather than trading through a limited company. These individuals will work on a succession of assignments where their skills are required for specialist projects.

      What is my employment status?

      Contractors working through No Worries Red Umbrella are a worker under employment law (Employment Rights Act 1996). Although you work on temporary projects or freelance work you are employed for tax purposes. We take care of applicable payroll taxes and administration on your behalf.

      All workers with No Worries Red Umbrella are required to enter into an employment related agreement. 

      What is a Worker Contract?

      No Worries Red Umbrella typically operates a Worker Contract for all our umbrella workers. As a worker, you have employment rights including;

      You may also be entitled to Statutory Sick Pay (SSP)Shared Parental Payparental bereavement pay and maternity, paternity and adoption pay. As a worker, you are not entitled to sick leave, maternity or other types of parental leave, but you can take time off because you do not have to make yourself available for work.

      Onboarding with No Worries Red Umbrella

      The sign-up process is simple and fast. Just go to our Sign Up, complete the details online, and we’ll start processing your application right away.

      To ensure we comply with UK employment rules, every new worker will undergo an identity check, along with check of your right to work in the UK. Your application will only be progressed further once these checks are complete.

      Identity Check

      As a UK employer we need to complete identity checks for all new employees who use No Worries Red Umbrella. We have partnered with Yoti to help make this process extremely easy.

      Right to Work Check

      British the Irish passport holders automatically have the right to work in the UK. All other applicants will need to produce a share code from the Home Office which we will validate.

      How does an Umbrella Company calculate my take home pay?

      All UK Umbrella Companies must operate PAYE and make National Insurance deductions. You will pay taxes in the same way that a permanent employee does.

      As all umbrellas operate under the same rules and regulations, there is are no special offers available or creative payments. Your pay should be roughly the same, with the only variable being the margin for using the umbrella service.

      All UK taxpayers have a tax code which determines the amount of pay that is tax-free. For the 2023/24 tax year the usual tax code is 1257L which means that the first £12,570 of earnings do not suffer PAYE deductions (This amount is pro-rated over the year in line with how you are paid i.e. weekly or monthly). Every pound earned over the personal allowance is taxed at 20% up to £50,270 and then 40% up to £125,140, and 45% for any earnings over this amount.

      Why am I paying Employers NI?

      All UK Umbrella Companies, as employers, are required by law to pay employer’s national insurance contributions to the HMRC, and in some cases the apprenticeship levy too. These contributions are made from the funds received from the recruitment agency or client for services received. The contract rate that you negotiate is not your salary until employers NI, apprenticeship levy and the umbrella margin are deducted.

      In most situations the rate that you are offered to work through an umbrella contract will account for this and be higher than if you were engaged directly with the end client. Bear in mind that if you were to accept a role with the same rate of pay as a permanent member of staff, you would actually be taking home less.

      How much money can I expect to take home?

      Your take home pay will depend on several factors, but as a general rule you will receive between 60% and 75% of the contract rate, depending on your rate, as higher income means higher taxes.

      All compliant umbrella companies will deduct the required taxes in the same way so your take home pay will onlyvary by the margin charged for the service.

      Prior to April 2016 you could claim expenses to reduce the amount of tax deducted. However, the HMRC restricted this as part of an anti-abuse measure and it is no longer possible.

      Any “umbrella” provider promising up to 90% take home pay is most likely to be a contractor loan scheme. HMRC are clear that they regard such schemes as tax avoidance.

      Claiming expenses

      Before April 2016 an array of expenses could be claimed by an Umbrella worker where the reimbursement operated as a form of salary sacrifice with a corresponding drop in taxable pay resulting in significant NI and PAYE savings. This is no longer the case.

      No Worries Red Umbrella only allows agency chargeable expenses to be claimed. This is where an expense claim is made in addition to your normal timesheet income. We will invoice the agency for your normal timesheet income and will add any chargeable expenses on top of this. Obviously, you must already have an agreement in place with your agency to reimburse you for the agreed expenses.

      These agency chargeable expenses must be incurred wholly and exclusively because of the assignment, and we must have a receipt for the exact amount. Once the agency invoice has been paid, these expenses can then be reimbursed back to you free of tax when your normal payslip is processed.

      If the expenses related to travel to a temporary workplace, additional checks will be required by us before the claim can be processed. 

      How and when will I be paid?

      Your salary will be paid directly into a UK bank account. Once we receive funds from your agency or end client, we will process the pay run and pay you. If the funds are received in our bank account by 1pm youwill be paid the same day.

      Once your payment has been made you will receive a text message, and your payslip will be available online.

      What about pension?

      As a UK employer, your umbrella company is legally required to provide you with access to a workplace pension scheme. To help all of us to save for our retirement, automatic enrolment has been introduced by the Government. This means that employers have to enrol all eligible employees into a workplace pension.

      All pension contributions are funded from the contract rate that you are paid. The minimum contribution for the current tax year is 8%. Once you’re auto-enrolled, the umbrella company will collect a percentage of your income and place it into a workplace pension scheme on your behalf.

      How an Umbrella Company works

      • You will sign an overarching contract of employment with the umbrella company
      • The umbrella company will sign a business-to- business contract with the client or recruitment agency
      • You will complete a timesheet for hours/days worked for the umbrella company, and use the required system for logging your time with the agency
      • The Client (who will be engaging your services) authorises the agency timesheet, which will confirm to them the hours/days that you have worked
      • The Umbrella Company will raise an invoice to the Agency for the work you have done plus any expenses that the client has agreed to reimburse
      • The Agency invoices the Client for work completed plus any chargeable expenses
      • The Client pays the Agency
      • The Agency pays the Umbrella Company. The date will be determined by the Agency’s payment schedule
      • The Umbrella Company processes the payment and any chargeable expenses and deducts thenecessary PAYE and NI contributions. You receive payment of salary into your personal bank account and are notified of paymentYou will receive your payslip showing the rate of pay and deductions suffered

      What is my IR35 status?

      As a contractor you would likely have heard of IR35. This is legislation designed to stop ‘disguised’ employees working through their own limited company to gain a tax advantage.As an umbrella company contractor, you are a permanent employee, that is paid salary through the PAYE system, allowing for all applicable taxes. You are outside the scope of IR35.


      As our employee, you’ll be covered by the following insurances:

      • Employer’s Liability insurance, up to £10 million
      • Public Liability Insurance, up to £5 million
      • Professional Indemnity Insurance, up to £5 million

      All our employees are covered by our insurance at no additional charge.

      Holiday Pay

      You are legally entitled to holiday pay. Since April 2009 all PAYE employees are entitled to 5.6 weeks paid holiday each year. This equates to 28 days.

      It would not be financially viable for the umbrella company to fund this holiday entitlement, so it is funded by the contractor.

      The percentage typically used to work out holiday pay is 12.07% of your hourly rate > 5.6 weeks / (52 weeks – 5.6weeks) = 12.07%

      Under the terms of the Working Time Regulations (WTR), holiday pay cannot be included in basic pay, so all umbrella companies are obliged to show each element of pay as a separate entry on your payslip.

      Each time you are paid, holiday pay will be deducted and taxed, but this money remains yours.

      Your holiday pay can be ‘paid in advance’ on a weekly or monthly basis in line with your basic pay. This means that there would be no pay for when you take time off. Alternatively, you can decide to ‘accrue’ your holiday pay, which means it would be set aside to be paid when time is actually taken off. The amount to be paid would depend on the monies available in your holiday pot.

      Our system will allow you to see any holiday you have accrued. Any unused holiday pay will be refunded to you when you leave.

      What are the benefits of choosing No Worries Umbrella?

      No Worries has been working with contractors since 2006 – and in that time we have learnt a lot about making our contractors lives hassle free. Great service and happy contractors are key to all of our offerings. With No Worries Umbrella you get:

      • A user-friendly online portal to access any time, anywhere.
      • Quick and easy timesheets.
      • All emails will be answered within the working day.
      • All calls answered by a member of our helpful team.
      • A dedicated point of contact for the duration of your employment with us, so you can speak to the same person each time you call.
      • We run payroll daily (on working days) and will pay you the same day the funds clear into our account.
      • You are covered by our insurance.
      • You can submit both timesheet and expenses information through our online portal.
      • We invoice your agency or end client the same working day as you raise your timesheet.
      • No administration hassles. Just raise your timesheet and get paid.

      Ltd Company

      Contacting through your own limited company involves a higher element of administration and effort, however the net pay benefits can often make this an attractive option. For more information take a look at our No Worries limited company service for contractors.