Unlike permanent employees, contractors do not automatically receive their payments every month. Instead, they must submit timesheets and invoices to receive their pay. If you’re new to contracting, the process of authorising payments can be daunting. But, in reality, it is a very simple and straightforward process.

Read on as we break down the easy steps that many follow to receive their contractor take-home pay.

Completing timesheets

For normal, permanent employees, the most that would need to be authorised when it comes to money is any expenses. However, with contractors, it works a little differently.

If you’re on working based on an hourly rate, you should be preparing a timesheet at the end of every week. In it, you should provide a detailed summary that includes how much time you’ve worked, along with what you’ve worked on. Once you’ve finished, it’s typical to send it off to your client, manager or agency for them to approve.

Alternatively, if you’re working with a client based on a day rate, it’s normal to prepare your timesheet at the end of the month. For monthly timesheets, you’ll enter similar information. This will include how many days you’ve worked along with a brief summary of work delivered, before passing it on to your client.

Your client will then refer to their in-house protocols as they approve your timesheet. They’ll just be checking that it’s accurate and in line with the work produced over the period in question.

The timesheet will then be returned to you so that you can use it to raise an invoice. Alternatively, if you work with an agency or an umbrella company, you can pass your timesheet on to them so they can directly invoice on your behalf.

Raising invoices

There are two different routes to take when it comes to invoicing. Some of the higher-earning contractors choose to invoice and operate via their own Limited Company. Others choose to operate through an umbrella company who takes care of invoicing on their behalf.

While the two options have their differences, it’s likely that you’ll still go through the same processes. Your client will approve the invoice before passing it on to the relevant financial lead. You’ll then receive payment within the time agreed, usually within 7 or 14 days.

When it comes to choosing your approach, it’s important to bear in mind that they both have their pros and cons, it just depends on how you’d like to work.

Invoicing as a limited company

Some contractors prefer to invoice as a Limited Company as it gives them full control over any transactions. If you were to go down this route, you’d be held fully responsible to comply with any statutory requirements. This is particularly important as you will be expected to pay corporation tax and file your accounts with Companies House.


This will be advantageous if having full revenue control is important to you. It will also mean you can receive payments faster and since your tax will be slightly reduced, your contractor take-home pay will be higher.


However, some contractors do not enjoy the sheer level of paperwork that is involved and can struggle to keep on top of it. This can be a particular issue if any administration is delayed as there can be penalty charges for late filing.

Invoicing through an umbrella company

The primary difference between using an umbrella company is that you’ll have fewer responsibilities. Your chosen provider will take care of any administration, including your tax and invoicing. Your client will also provide payment to the umbrella company who will then provide payment to you.


The key advantage of choosing this route is that it saves you time. Once you’re set up with your provider, all you’ll have to worry about is creating your timesheets and getting them approved.

If you’re a short-term contractor, they can be of particular benefit. It will save you the pain of having to go through the pricey procedure of creating a company and then shutting it down.


Of course, using an umbrella company will mean that you are not in full control of your transactions. You will therefore not be able to act as an independent business. Instead you’ll have to comply with the umbrella company’s policies.

It’s also important to take note of IR35. By working with an umbrella company, you will be outside IR35 and therefore could face a higher tax bill at the end of the financial year. You’ll also have to consider the cost of their service when evaluating your total contractor take-home pay.

Potential payment issues

When working in such a busy environment, it can be hard to stay on top of everything. While very few contractors do experience these problems, it’s always worthwhile to be prepared should you encounter them.

Timesheet accuracy

One potential issue could be that your client believes you are not filling in your timesheets accurately. If they believe you’ve added extra hours, they could perform attendance checks, such as when you’ve signed-in and whether you have remained at your desk.

Misplaced invoices and timesheets

Paperwork is easy to misplace and lose track of. If a client loses your paperwork, they should be upfront with you and request new copies. If they don’t inform you and your payment is delayed, they could be in breach of your contract if prompt payment is noted within the contract.

Enjoying quick payment

Overall, it’s a simple process. Good organisation is important for keeping on top of the relevant paperwork and administration. Yet many contractors enjoy a straightforward payment process that sees their earnings coming in on time, every time.

But, if you do struggle to keep on top of accurate paperwork, an umbrella company could be a fantastic option. They’ll be in charge of chasing late payments, handling your tax needs and keeping on top of any extra bits of admin, leaving you to relax and enjoy your work.

Minimising umbrella company costs

The cost of an umbrella company is typically well worth it considering what you get back. But that doesn’t mean you shouldn’t shop around for the best deal. Use our umbrella company comparison site to explore your options. Enter a few details and you’ll see a breakdown of your projected income, including the umbrella fees, tax and national insurance. You’ll also get a chance to explore the different benefit packages offered by prospective companies.