Umbrella companies can be helpful for contract workers with multiple employers (which is very common for short term contractors). The umbrella company takes on the administrative burden of payroll from the contractor. It charges fees for its work

This is how it works:   

• A worker is engaged to work for a contractor
• Worker signs an employment contract with the umbrella company
• Umbrella company bills the contractor for work done (by the worker)
• Umbrella company pays the worker

This is great for anyone working for lots of different contracts.

Unfortunately there are some unscrupulous umbrella companies. They are attracting workers with schemes that enable their workers to have higher pay. Very often these schemes are illegal.

Some examples of illegal payments:

• Money on the pay slip which is not taxed (eg a loan)
• The worker is paid more money than shown on the payslip

Eventually the worker faces a large tax bill with extra penalties and interest.

Just remember :

If it sounds too good to be true – it is!

Here is a link with further information: https://www.gov.uk/guidance/working-through-an-umbrella-company#how-an-umbrella-company-works