I’m a new agency, why should I use an umbrella company?

As an agency, you will no doubt have lots of things to think about. Working with an umbrella company can be a great way of freeing up people resources, meeting compliance obligations and ensuring that everything runs smoothly.

But what do umbrella companies actually do?

In this article, we explain what an umbrella company is, and how an umbrella company can help employment agencies run more efficiently to provide a professional, compliant, and high-quality service for contractors.

What is an umbrella company?

An umbrella company is an intermediary who employs contractors working for an agency on fixed term contracts. The contractor might be working on just one or multiple contracts for the agency. The umbrella provides payroll and employer benefits as the single employer for the contractors. 

As the employer, the umbrella company is responsible for raising invoices and processing time sheets, ensuring that contractors get paid on time, while meeting their tax obligations, as well as other deductions such as pensions contributions.

How can an umbrella company help agencies

Umbrella companies reduce the burden on agencies and contractors. As specialists, they know how to operate efficient and compliant payroll, and are usually experts in employment topics such as PAYE and IR35. Working with an umbrella company also means that contractors can work outside IR35 without having to work through their own limited company.

Umbrella companies can be a huge support to agencies, helping you to develop your recruitment business and providing regulatory and industry advice.

Benefits of umbrella companies for agencies

There are several benefits to agencies of partnering with an umbrella company.

One of the main benefits is that all employment obligations sit with the umbrella. This means that worker contracts, payroll, pensions, tax and NIC contributions, worker insurance and compliance are all the responsibility of the umbrella. 

Umbrella companies will also ensure that IR35 compliance is met. 

These things can all add up to create a lot of work, partnering with a compliant umbrella minimises administration costs and resource burden for the agency. 

Making sure workers are paid on time

The current state of the economy is restricting the availability of credit, with lenders looking for borrowers to meet ever more stringent conditions.

This means that new employment agencies might find it difficult to access the credit they need to ensure that contractors are paid on time. Many end hirers have slow and complicated invoicing processes, this means that agencies are left to bridge the gap between being paid by the hiring company and paying the contractors.

Some umbrella companies also offer credit to agencies to help them meet their payroll budgets (JMK Group UK offers a payroll credit service called JMK Alliance), which can be useful if you are a new agency just starting out and finding it difficult to access credit. 

Benefits to contractors of working with an umbrella

Partnering with a compliant umbrella company can also make your agency more attractive to contractors who will benefit from the continuous employment offered by the umbrella company. This is helpful if they want to apply for a mortgage or have regular outgoings that they need to meet. 

As an employee, contractors are also eligible for holiday pay and a company pension, as well as being able to access benefits such as statutory sick pay and paternity/maternity pay. Tax and NI payments are made through PAYE and, as long as the contractor isn’t subject to SDC (supervision, direction, or control), they are also able to claim tax relief on certain allowable business expenses. 

Working with an umbrella company can release the administrative and compliance burden on you as an employment agency, leaving you free to focus on running your business. 

If you’d like to find out more about how partnering with an umbrella company could help you provide a more efficient and effective service to your contractors, do get in touch with us here at JMK Group UK. We are an FCSA accredited, compliant umbrella who have been offering support to contractors and recruitment agencies all over the UK for over 20 years.


Since 2002, JMK have been compliantly consolidating back-office, accountancy and payroll functions. 

We have evolved to provide a range of expert services; such as Funding, becoming a leading provider to the contracting industry.

We know every agency is different in some shape or form, even if only by a little, but important bit. Combining our knowledge and experience of multiple sectors enables JMK to support you all from recruiters and payroll, through to finance, compliance and management.

With JMK as your trusted partner, even the smallest team can process the largest payroll, regardless of payroll type.

Have a look at the wide range of services our Funding can provide to you and your business, it is far more than just payroll and finance.

Don't miss your Free Reports

Complimentary payroll comparison report
Play Video
Complimentary financial forecast report
Play Video