Why are umbrella companies quoting me different take-home pay calculations?

Before registering with an umbrella company, you’ll almost certainly want a breakdown of your expected take-home pay (a take-home pay calculation). However, if you’ve asked for a take-home pay calculation from a handful of umbrella companies, you may notice that despite giving them all the same details, your expected pay retention is different. Don’t be tempted to use an umbrella company because they have a higher take-home pay projection, as we explain below.

Umbrella companies will pay you in the same way

Every compliant umbrella company in the United Kingdom will pay you in the same way – with HMRC’s tax system called Pay As You Earn (PAYE). For example, suppose you were to be paid by two different umbrella companies for the same period (both are compliant and have the same weekly margin). In that case, you should expect to retain the same amount of money from each – to the penny.

Unfortunately, it’s not uncommon for umbrella companies to deliberately try and inflate their take-home pay calculations. They may do this in several ways (listed below). The only reason an umbrella would do this is to trick you into using their services over a competitor. It’s an unethical approach and something you need to be wary of.

Here are some of the reasons why umbrella company take-home pay calculations vary between providers:

Margin

Umbrella companies deduct a small margin each time they process payroll to cover administrative and business costs. Margins vary between umbrella companies and will impact your take-home pay. For example, you should expect to retain a little more of your pay if you pick an umbrella with a £20 weekly margin compared to one with a £30 per week margin.

£100,000 earning threshold

Did you know that for every £2 you earn over £100,000, you lose £1 of your tax-free personal allowance? You may notice that some umbrella companies include this in their take-home pay calculations, whilst others don’t. This will impact your overall pay retention and is something that needs consideration.

Correct working arrangements

When requesting an umbrella company take-home pay calculation, make sure the umbrella has taken your working arrangements into consideration. Some will adjust the number of working weeks etc. to inflate the figures you see, and this is misleading.

Tax Code

For whatever reason, you may not be on the most common of tax codes. With this in mind, make sure the calculations you receive account for your tax code because failure to do so could produce some extremely inaccurate pay retention figures.

Holiday Pay

Holiday pay can often cause uncertainty and confusion. Most umbrella companies will allow employees to claim holiday pay in two ways – by having it processed every time payroll is processed, or accruing it so that it can be paid later to the employee in a lump sum.

When you speak with an umbrella about your take-home pay, ask about holiday pay. For example, if you would like to accrue your holiday pay and this option is available to you, make sure the take-home pay calculation you receive reflects this and doesn’t sneakily include your holiday pay.

Expenses

When working through an umbrella company, you will unlikely be able to claim expenses due to legislation referred to as Supervision Direction and Control. Compliant and transparent umbrella companies will clarify this when you discuss your potential take-home pay with their service. However, others will add expenses to their calculations to boost the results. This is highly unethical, and an umbrella should only include expenses if you are confident you can claim them.

Request a free, tailored take-home pay calculation from Churchill Knight Umbrella

Our professionals are on hand to provide you with a free, tailored take-home pay calculation. We do everything possible to ensure the figures you receive are accurate, realistic and transparent. Our team understands that circumstances vary between taxpayers, such as tax codes, hours worked per week, and so on. Therefore, we’ll ask you a series of questions to produce a tailored calculation.

Please call 01707 871622 or complete the short form on this page to request an umbrella calculation. Alternatively, you can complete the form here to request a call at a convenient time.