Comprehensive Guide: Setting Up as an Umbrella Locum – Your Path to Financial Clarity and Professional Freedom

Choosing to work with an umbrella company as a locum has its advantages and considerations. Lets dive into what an umbrella company is and how to set up as a Umbrella company!

Umbrella company has two main ‘functions’

  • Payroll
  • Employment

Payroll – deducts the necessary tax and NIC’s, pensions, student loans, net pay paid into personal

bank account

Employment – contractor classed as employed and receives all statutory benefits (sick pay,

holiday pay, insurances, pension, HR etc)

There is no legal definition of ‘umbrella company’ – as a result has led to uncertainty and confusion.

Complaint umbrella companies should work in the same way and offer the same net pay %

Why use one?

  • No ‘tax work’ – umbrella company acts as your employer/payroll department so does the hard work for you.
  • Employed status, no worrying about IR35/MSC/Loan-Scheme/False self-employment legislation, therefore no ‘looking over your shoulder’ and ‘peace of mind’
  • Make sure you partner with credible supplier, HMRC have begun ‘naming and shaming’ non-compliant umbrella operators on their website.
  • Perfect for contractors aiming to complete multiple assignments with different practices, hence the term ‘umbrella’ – you can put all of your assignments ‘under one roof’.

Setting up

Firstly, you need to find an Umbrella Company.

There are many in the Management For Locums community such as I4 group and Locumvetpay.

I always recommend contacting them first as by doing so, you can gauge who you trust to fulfil your individual requirements.

Contact MFl recommend umbrella companies here:


They are in charge of your payroll, so you need to trust them.

Once you have found an Umbrella Company, you will need to register with them online.

This normally takes 5-15 minutes.

There are no registration fees with MOST Umbrella Companies and a rolling contract so you can leave whenever you like.

Following registration, you are often not required to pay anything or to be paid until after submitting your time sheet. Although, some companies may have variations on this process.

Ensure you understand the terms and conditions of the company you have chosen to work with. This allows you to prepare your financial route well in advance.

Umbrella companies are a great way of being organised and not overwhelmed by having to do everything at once, such as finding work and sorting invoices, tax returns etc. You only need to find work.

When you are registered with the Umbrella Company, you will be given an online account where you will submit and keep track of your records.

You will now be an employee of that Umbrella Company but still be very much in control of what work you do.

It is important to remember that you can swap Umbrella Companies at any time, if you wanted too.

Getting paid

If you find work through MFL the process is simple.

You will need to fill out a form for each client you work for. The Umbrella agency will use the time sheet you give them to invoice the practice directly and then pay you.

The Umbrella Company will pay you through the PAYE system and you will receive a payslip.

The payslip will include the Umbrella Company’s fee charge, tax and National Insurance deductions. In addition to this, any further deductions you have opted in to, such as a pension scheme.


Keep hold of all P45s and P60s. You do not need to file a tax return. If you work under an umbrella part time along side another job. You will have 2 tax codes. Be sure to contact HMRC to ensure they understand you overall take home pay. If they don’t receive this information from you, they will tax your emergency tax which is 40%.

In conclusion, choosing to work with an umbrella company as a locum has its advantages and considerations. It provides a simplified way to manage your finances, especially if you’re not looking for the extensive responsibilities that come with being a sole trader or limited company owner. The ease of administration, including tax and National Insurance contributions, can be appealing.

However, it’s crucial to weigh the pros and cons against your specific needs and circumstances. While umbrella companies offer simplicity, they may not be the most tax-efficient option. Consider seeking professional advice to ensure that the choice you make aligns with your financial goals and preferences.