Compliant Umbrella Companies are Equal – True or False?

Compliant umbrella companies will process your payroll (PAYE) in precisely the same way. The only thing that will vary between providers is the margin they deduct for carrying out their service. With this in mind, it’s essential that you understand the individual deductions that will appear on your payslip, and why some umbrellas will try and mislead you by offering unrealistically high take home pay.

Churchill Knight Umbrella is a member of the FCSA. This means we have been able to prove that all of our internal processes are compliant and that we provide an ethical payroll service to our clients. An excellent way to check if an umbrella company is compliant is to see if they have the prestigious FCSA accreditation.

Keep reading and find out more about the deductions you’ll see on your payslip, and what to look out for when choosing an umbrella company.

We start by explaining take home pay calculations, and will then run through the deductions you should expect to see on your payslip. Compliant umbrella companies will process your pay in the same way, but some may try and mislead you into choosing their service over another provider. We will explain how below.

Providing you only engage with compliant umbrella companies; your take home pay projections should be very similar. The only thing that should result in a change between providers is the margin they charge for their payroll service.

For example, if ‘Provider A’ has a weekly margin of £25, and ‘Provider B’ has a weekly margin of £15, you should expect to take home a few extra pounds each week with ‘Provider B’ – and that is it.

Not every compliant umbrella company will have your best interests at heart

Unfortunately, it is not uncommon for umbrella companies to deliberately mislead their clients. While they will process your payroll compliantly, they might unethically inflate your take home pay calculation so that you are tricked into thinking you will retain more of your pay with them compared to another umbrella.

For example, some providers will:

• Not take days off into account, and will give you a calculation based on you working every day of the year (not taking days off and holiday into account).
• Use an inaccurate tax code in your calculation.
• Include expenses in your calculation, even though it’s unlikely you’ll be eligible to claim expenses due to recent changes in legislation.
• Not take Student Loan payments into consideration, if they’re relevant.
• Not take the £100,000 abatement into consideration. This means that for every £2 you earn over £100,000 in the year; your personal tax-free allowance is reduced by £1. Churchill Knight Umbrella takes the abatement into account and our Consultants will let you know if it has been applied to your calculation.
• Quote their net margin rather than gross, which is lower than what they’ll actually be retaining.

Churchill Knight Umbrella will always give you an accurate take home pay calculation based entirely on your circumstances. We never mislead our clients and want to ensure we give you as accurate information as possible*.

Summary

Just because an umbrella processes your payroll compliantly, it doesn’t guarantee they have given you an accurate take home pay calculation. Some providers are unethical and are deliberately misleading their clients with inflated take home pay projections – just as a way of getting them to sign up.

Churchill Knight Umbrella will give you an accurate take home pay projection and will consider your personal circumstances. Please click here to request a take home pay projection, or give us a call on 01707 871622.

Every compliant umbrella company will make the same deductions to your pay (PAYE), and the only thing that will vary is the margin they charge for their service. Below is a summary of each deduction.

PAYE Income Tax

Just like an employee in a permanent role, you will be required to pay PAYE income tax.

Employees National Insurance

As an employee of Churchill Knight Umbrella, you will be required to pay Employees National Insurance (12%).

Employers National Insurance

There is often much debate about Employer’s National Insurance Contributions (NICs). Let us explain why it’s passed on to you, the contractor.

As an employee of Churchill Knight Umbrella, you work for your end-client – not us. Therefore, we process your payroll and deduct a small margin, but we do not benefit from any of the work you carry out. This makes it impossible for any umbrella company to be able to cover the Employers NICs (13.8%) – but it needs to be paid (legal requirement).

As a result, the Employers NIC is deducted from the assignment rate. However, it’s not all doom and gloom. Recruitment agencies and businesses who engage with temporary workers are aware of this situation and as a result, they frequently increase their assignment rates accordingly. This means that contractors like you are not out of pocket. You may have seen the same role advertised with different rate – one rate being agency PAYE, and the other rate being an umbrella rate (which will be higher).

Apprenticeship Levy

The Apprenticeship Levy is a government scheme that is designed to generate money for apprenticeships throughout the UK. Every business with an annual payroll of £3 million or more is required to pay this amount.

Your umbrella company will process your payroll, but you are not actually carrying out any work for them. Therefore, the Apprenticeship Levy deduction is passed on to you and is deducted from the assignment rate.

Holiday Pay

It is a legal requirement for umbrella companies to show Holiday Pay on your payslip (12.07%). However, your Holiday Pay is actually included in your rate of pay (your assignment rate). Therefore, the umbrella company will simply reallocate your own funds as Holiday Pay, and you will see this on your payslip.

Churchill Knight Umbrella clients can choose whether they want to have Holiday Pay allocated to them each payroll period, or have it accrued and paid to them in a lump sum at a later date.

Margin

Umbrella companies generate their income by charging a margin (usually weekly or monthly) for the processing of your payroll. This margin will cover their business costs such as administration, staff salaries, etc.

Churchill Knight Umbrella offers a very low-cost, high-value umbrella payroll service. Please contact us now for our best margin.

Pension

If you decide to opt-in to pension contributions, you will see the deductions on your payslip. It is a legal requirement for us to opt you in for pension contributions automatically. However, you can easily opt-out, and we can help you do this.

Student Loan

If you are currently paying back a student loan, you will see this deduction on your payslip.

Summary

Every compliant umbrella company will make the same deductions to your pay. The only deduction that will vary will be the margin they charge for processing your payroll.

There is often a misconception that umbrella companies are withholding the employment costs (Employees NIC and the Apprenticeship Levy) and keeping them for themselves. This is not true. These deductions are being paid directly to HMRC. The only income that umbrellas generate is their margin.

However, what will vary amongst compliant umbrella is the quality of service they offer. Make sure you choose a well-established umbrella company, and one that will provide with added extras – at no additional cost (including insurance, Same Day Faster Payments, and more). There are plenty of reasons our service is industry-leading. Please click here to find out more.

For more information on the deductions that you’ll see on your umbrella payslip, and to understand what is true and false about umbrella companies, please read our blog: ‘Umbrella companies: What is fact and what is fake news?’

Compliant umbrella companies will process your payroll in the same way, but they won’t all provide their clients with excellent customer service. Churchill Knight Umbrella processes the payroll of thousands of contractors every week. We are committed to customer service and will always go the extra mile to ensure you are happy with the service you receive.

Our standard umbrella service comes with a load of added extras, including free insurance, Same Day Faster Payments, your own dedicated Account Manager, no hidden costs, and Employee Benefits. Click here for more information on the benefits available to every Churchill Knight Umbrella client.

For a free and tailored take home pay calculation, please complete the short form on this page, or give our friendly team a call on 01707 871622. If you are happy with the calculation you receive and would like to go ahead and join Churchill Knight Umbrella, the registration process is really easy and we’re here to help you every step of the way. You can be registered and ready to be paid by us in under 15 minutes!

* There are many factors that can result in your actual take home pay being different from the calculation you were provided. These include your tax code, the amount of work you’ve done over throughout the tax year, your rate of pay, how many hours you work, whether you are working in Scotland or England, how much holiday has been taken into account, whether you choose to accrue Holiday Pay or have it paid each time your payroll is processed, expenses (some umbrellas include a set amount of expenses – as standard), the £100,000 abatement, and more. Churchill Knight Umbrella will do everything we can to ensure the projections we issue you are accurate, but your actual take home pay may vary.