The margin is the amount an Umbrella company retains from the money from your agency.

All compliant Umbrella companies operate in exactly the same way so one of the few ways providers can compete is on how much of a cut they take.

You would think this would be pretty easy to compare- but it isn’t always.

An Umbrella company’s margin is retained before the tax and NI calculation is carried out- so you don’t pay tax or NI on it. The amount that is actually retained is called the “gross” margin.

The amount that it actually costs you from your take home pay is called the “net” margin. This can vary according to your tax circumstances.

For example: for standard Umbrella employment, Gabem retains a weekly gross margin of £22 from the money received from your agency.

  • If you are on a normal tax code and fall into the basic (20%) tax band, this equates to just £13.14 from your take home pay.
  • If you are on a normal tax code and fall into the higher (40%) tax band, this equates to just £11.21 from your take home pay.

Some Umbrella companies will try and secure business by only quoting the “net margin” in their calculations and marketing material, rather than being up front about how much of a cut they actually retain.

So whether you are a contractor looking to maximise your take home pay, or a recruiter looking for the best deal for your temps, make sure you are comparing Umbrella companies on a like-for-like basis by querying whether the margin they are quoting is “gross” or “net”.  Better still get them to do an illustration for your specific situation.

Don’t be hoodwinked!

 

Tell us what Umbrella jargon you would like explained, or any aspect of Umbrella contracting that you are not sure about.

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