What Is Umbrella Company?

You invoice the umbrella company (or they receive payment from the agency on your behalf), the umbrella deducts its margin, employer costs, and PAYE tax and National Insurance, then pays you a net wage, exactly like being a regular employee. In the UK, umbrella working is the default route for contractors assessed as inside IR35, since there's little tax benefit to running a limited company once you're taxed at PAYE rates anyway.

The appeal is simplicity: no company accounts, no Corporation Tax filings, no director responsibilities. You get continuous employment rights (holiday pay, sick pay, pension auto-enrolment) that a limited company director typically doesn't get in the same way. The cost is the umbrella's margin (typically a flat weekly or monthly fee) plus employer-side National Insurance and the Apprenticeship Levy, which are deducted from the contract rate before you see it, not on top of it.

In Ireland, the closest equivalent is a PAYE umbrella structure, one of the three main contractor routes alongside sole trader and limited company director, generally the simplest but with the least scope to claim expenses against tax.