Five Reasons to Think Twice Before Using an Umbrella Company for a Locum Solicitor

If you are bringing in a locum solicitor, agree how they will be engaged and paid before the first file lands on their desk. An umbrella company can provide an employment and payroll service, but that does not automatically make it the best arrangement for your firm.

The right approach depends on the assignment, the contractual arrangements and the applicable tax rules. Here are five reasons to consider the alternatives where they are available.

1. Another layer of administration has a cost

Umbrella companies charge a margin for processing pay. Ask how that fits into the quoted rate and what the arrangement provides. Compare the full cost with any suitable direct employment, agency PAYE or genuinely self-employed arrangement. A longer chain does not necessarily give your firm a better service.

Our locum solicitor hourly rates guide is a useful starting point for budgeting. The published rates relate to self-employed locums billing clients directly, with agency fees additional. They should not be treated as equivalent to an umbrella assignment rate or an employee’s take-home pay.

2. The headline rate can cause misunderstandings

The amount paid to an umbrella company is not the same as the locum’s gross salary or take-home pay. Employment costs and the umbrella margin can come out of the assignment rate before gross pay is calculated. Income tax, employee National Insurance and other applicable deductions then affect what the locum receives.

Agree which rate everyone is discussing and ask for a written breakdown before the assignment starts. Otherwise, the locum may discover that the payment they expected is quite different from the amount they receive. HMRC’s guide to checking umbrella company payslips explains what to look for.

3. Holiday arrangements still need attention

Umbrella employees have employment rights, including paid holiday. Establish how leave will be arranged during the assignment and how holiday pay fits into the quote. The locum should understand whether holiday pay is paid alongside wages, where permitted, or paid when leave is taken.

From the firm’s perspective, the practical question is simple: who will cover the work when the locum is away? Payroll arrangements do not answer that for you. Agree any planned absence and cover requirements before work begins.

4. The paperwork can multiply

The law firm, agency and umbrella company may all have a role in the arrangement. That can mean more requests for timesheets, invoices, information and approvals. For a small practice looking for someone to cover a caseload, it can feel as though the paperwork has acquired a caseload of its own.

Some checks are necessary. The point is to establish who needs what, who authorises hours and who resolves payment queries before the assignment starts. Your accounts team should not have to work it out after the first invoice arrives.

5. Tax responsibility does not necessarily stop at the umbrella

HMRC does not approve or endorse umbrella companies. An impressive sales pitch or a promise of unusually high take-home pay is not a substitute for checking the arrangement. Ask who employs the locum, who operates PAYE and what evidence supports the provider’s compliance.

Using an umbrella company does not, by itself, remove tax risk from the rest of the supply chain. The rules introduced in April 2026 make understanding that chain particularly important.

What changed in April 2026?

For money paid to workers on or after 6 April 2026, the umbrella PAYE rules apply to both new and existing arrangements. The agency contracting with the end client to supply workers is responsible for making sure PAYE is operated correctly. Where there is no agency involved, that responsibility falls on the end client.

HMRC can recover PAYE underpayments from the relevant agency or end client. The umbrella company retains its own responsibilities as the employer.

For law firms, the practical point is to understand the actual contractual chain. Do not assume that everyone describing themselves as an agency is supplying the worker under the same arrangement. Check who contracts with whom and where responsibility sits.

Read HMRC’s guidance on the umbrella PAYE rules from 6 April 2026.

Our view

For SME law firms, who make up the bulk of our clients, umbrella companies have traditionally been seen as a bit of a nuisance because of the paperwork and detail they require. Where genuine self-employment is appropriate, a locum invoicing the firm weekly can be a simpler arrangement.

However, registering as self-employed or issuing an invoice does not settle employment status or tax treatment. The contract and actual working arrangements must support it, and any applicable agency or off-payroll rules still need to be considered. Choose the simplest arrangement that is right for the assignment, rather than assuming one payment method will suit every locum.

Our locum recruitment services for law firms and in-house teams can help you find cover suited to the work you need done. Agree the engagement and payment arrangements before the locum starts, and obtain tax or employment advice where needed.

Need a locum solicitor?

Tell us the area of law, the dates you need covered and whether the work is office-based, hybrid or remote. We can discuss your requirements, likely rates and available candidates.

Alternatively, call 0800 246 5001 or email jobs@interimlawyers.co.uk.