A "cheap" umbrella charges around £15-18 per week. A properly run one charges £20-25. On the payslip, that £3-7 looks like a saving. It isn't.

What you're actually paying for at the lower end is the absence of compliance infrastructure. Smaller margins mean smaller back-office. Smaller back-office means corner-cutting on the things that don't show up on a payslip — until they do, six months later, when HMRC sends you a letter.
Here's what nobody tells contractors when they pick the cheapest option.

The umbrella doesn't pay your PAYE out of the £15. It pays your PAYE out of the assignment rate the agency sends them. The umbrella's margin only covers their costs and their compliance. So when a provider undercuts the market by £5 a week, they're not absorbing that cost personally. They're cutting it from somewhere — usually the systems that keep your tax records clean, your holiday pay calculated correctly, and your statutory rights actually delivered.

Most contractors don't notice until something specific goes wrong. A holiday pay underpayment that gets traced back six months. A pension contribution that wasn't actually paid into the scheme. A P60 that doesn't reconcile to the payslips. A SSP claim that gets refused because the records weren't filed properly.
That's the real cost. And it lands on you, not the umbrella.

There's a separate problem worth mentioning. Some lower-margin umbrellas operate on what's politely called "creative" tax models. Disguised remuneration. Loan schemes. Growth share arrangements that aren't actually growth shares. HMRC has been actively pursuing these models for years, and from April 2026 the chase intensifies. Workers who used these schemes have been hit with retrospective tax bills running into five and six figures.

The agencies who placed those workers? They're now jointly liable for the unpaid PAYE under the new legislation. Which means the agencies who survive 2026 will be the ones who've already pulled out of cheap-umbrella relationships, regardless of what their workers prefer on the payslip.

Practically speaking, here's what a properly run umbrella does that a cheap one often doesn't.
 

Holiday pay is calculated correctly and paid on time, every time, with a clear breakdown showing the worker exactly what they've accrued and what they've taken. SSP, SMP, and statutory pension contributions are remitted to the right scheme on the right date, with audit trails. PAYE and NIC are calculated and paid to HMRC on the correct schedule, not "broadly around the right time." Auto-enrolment is set up properly from day one, not as an afterthought when the contractor asks. National Minimum Wage compliance is checked on every pay reference period, not assumed.
None of that is glamorous. All of it costs money to do properly. And all of it is what you're actually buying when you pay £20-25 a week instead of £15.
 

The honest answer is that for a contractor on £400 a day, £3 a week is 0.15% of their gross. It's a rounding error. The cost of getting payroll wrong, measured in chased HMRC letters, retrospective tax bills, lost holiday pay, and pension contributions that never reached the scheme, is significantly more than that.
We've had contractors come to us after a year on a cheap umbrella holding payslips that don't match their P60, holiday pay that was promised but never paid, and pension contributions that show on their payslip but never reached their pension provider. Untangling that takes weeks. Sometimes months. And the contractor is the one out of pocket while it happens.
 

This isn't an argument for the most expensive umbrella in the market. Plenty of mid-priced providers do the job well, and a few premium-priced ones don't. The question to ask isn't "what's the margin." It's "what does the margin actually pay for, and can you show me?"

If a provider can't answer that question with specifics — named systems, named compliance frameworks, audit trails you can actually see — keep looking.

We're PCA-approved, our compliance is documented, and our contractor retention rate is one of the highest in the sector. Not because we're cheap. Because the work we do behind the payslip is the work that keeps your tax records clean, your statutory pay correct, and your pension contributions where they're meant to be.
If you want a payroll provider that takes payroll seriously, talk to us.