Breaking It Down - Umbrella PAYE Payslip
- elin9975
- 12 minutes ago
- 3 min read
With the inner workings of Umbrella companies being tested and audited ahead of Joint and Several Liability coming info force next April, we thought it would be prudent to lay bare our own workings! Want to see how a compliant Umbrella company operates? Then familiarise yourself with the below, as we work through an Umbrella PAYE payslip and how it’s calculated.
Company Receipts/Basic Pay
Also known as the ‘Contract Sum’, this is the total amount received from the agency for this payment period. It will show the number of hours / days worked, and the agreed contract rate with the agency. Note – this is not the gross pay, as the contract rate includes employment costs that need to be deducted first, which we explore below.
Company Deductions/Employment Costs
When a worker is employed by an Umbrella company, it means that as employers, we’re required to make the statutory employment payments to HMRC. Therefore, the contract rate agreed with the agency typically incorporates these costs to ensure that they’re allocated. You will therefore see the below;
Employer’s National Insurance (15%)
Apprenticeship Levy (0.5%)
Employer’s Pension Contribution (3%)
Holiday Pay accrual (12.07%)
We defer pension auto-enrolment for 12 weeks, however workers are more than welcome to choose to opt-in earlier. Just speak to us to arrange!
It is at this point that you will see reference to our retained margin for our services – this is confirmed verbally and in writing upon registration with us.
Clipper Fact – if more than one timesheet is processed in the same week ending period, only one margin is retained per week ending date! Our system recognises this and calculates the additional amount due accordingly, so there’s nothing extra to retain from any additional timesheets or work completed.
Employee Payments Section
Once the employment costs have been retained, the remaining funds make up the
taxable pay as follows;
Basic Rate – we have to show that we’re paying at least the legal National Minimum Wage, so the hours worked are displayed here and multiplied by the NMW (currently £12.21).
Additional Pay – this is then the difference between the income above the NMW, to the taxable pay.
Paid Holiday Pay – if a worker has chosen to have this advanced with their wage, or requested any amount of holiday pay, then this will appear here.
Employee Deductions
Having worked out your taxable pay, the following statutory deductions are then made;
Employee Tax (20%, 40% or 45%, see note below)
Employee National Insurance (12%)
Employee Pension Contribution (5%, but there is the option of contributing more. Please speak to us for further information!)
Any student loans, attachment of earnings orders, or other mandated deductions.
Remember - how much income tax is paid in each tax year depends on your tax code, how much of your income is above your Personal Allowance, and how much of your income falls within each tax band. The current standard Personal Allowance is £12,570.
For more information about tax, you can refer to HMRC’s guidance;
Net Pay
Finally we get to the most important figure of all – the net pay, which is the amount that is paid after all deductions have been made. In this section you will also be able to see a summary of figures from this payment plus the tax year overall to date, in addition to a reminder of how much holiday there may be accrued.
We hope this guide has helped, but for any further questions please don’t hesitate to contact us.
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