National Insurance Contributions

What is the payment process for Tax and National Insurance?

Umbrella companies operate the PAYE payroll system. Once you've signed up to the umbrella of your choice, you'll need to provide them with proof of ID, your address and P45. You become an umbrella employee under an overarching contract. You carry out your contracted work hours at the temporary workplace.

You email your timesheets to your umbrella company, and they'll invoice your agency. The agency or end client will pay your umbrella a rate the contract rate to cover payments for the work you have completed. This will also include all the costs related to your employment such as employers NICs and holiday entitlement. This rate is higher than if you were paid PAYE directly by the agency / end client, to cover these additional costs.

On the day the agency releases the funds, your umbrella company will process the payment and make deductions for Income Tax, NICs, pensions and their admin fee. The process is now complete!

You will pay two different types of National Insurance: Employer and Employee

There are two types of National Insurance that will be deducted from your pay. One is Employer NI and one is Employee NI.

As a contractor under an umbrella company you will be paid a higher rate to compensate for you paying both the employer and the employee National Insurance.

If you were to be paid by a recruitment agency, they would pay their own Employer National Insurance but you would receive a lesser rate. The recruitment agency is passing the Employer’s NI to the Umbrella Company to pay instead by adding it into your daily rate. Basically, you will not be earning less because of the National Insurance payments.

Read our information page about understanding your payslip.

Find out more about maternity pay as an umbrella employee.

Read More

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National Insurance Contributions

What is the payment process for Tax and National Insurance?

Umbrella companies operate the PAYE payroll system. Once you've signed up to the umbrella of your choice, you'll need to provide them with proof of ID, your address and P45. You become an umbrella employee under an overarching contract. You carry out your contracted work hours at the temporary workplace.

You email your timesheets to your umbrella company, and they'll invoice your agency. The agency or end client will pay your umbrella a rate the contract rate to cover payments for the work you have completed. This will also include all the costs related to your employment such as employers NICs and holiday entitlement. This rate is higher than if you were paid PAYE directly by the agency / end client, to cover these additional costs.

On the day the agency releases the funds, your umbrella company will process the payment and make deductions for Income Tax, NICs, pensions and their admin fee. The process is now complete!

You will pay two different types of National Insurance: Employer and Employee

There are two types of National Insurance that will be deducted from your pay. One is Employer NI and one is Employee NI.

As a contractor under an umbrella company you will be paid a higher rate to compensate for you paying both the employer and the employee National Insurance.

If you were to be paid by a recruitment agency, they would pay their own Employer National Insurance but you would receive a lesser rate. The recruitment agency is passing the Employer’s NI to the Umbrella Company to pay instead by adding it into your daily rate. Basically, you will not be earning less because of the National Insurance payments.

Read our information page about understanding your payslip.

Find out more about maternity pay as an umbrella employee.

Read More

The quickest way to get
the best take home pay

Stop losing your hard earned cash!

Fill in your details below and start saving now!

Your information is safe: Privacy Policy