The first time you view your payslip from an Umbrella Company, there may be some differences compared to what you are used to.
There are 2 parts to your documents, a pay statement that will show you the calculation from the Contract Rate received by the Umbrella Company through to your net pay. The other document will be a ‘normal’ payslip that shows the deductions from your Gross Pay through to net pay.
Pay Statement below is a snippet of what it should look like, which will be explained further below:
In the top left this is the Contract Rate this is the enhanced uplift the agency pays to the umbrella company to cover employment costs. If the agency employed you direct, your shift rate would be lower as the Company Costs would not need to be covered.
In the top right box you will see a detailed breakdown of what those Company Costs are. The Contract Rate less the Company Costs then brings you to your Gross pay.
Your Gross Pay is then split across a few lines, Basic Pay, this is to show you are being paid minimum wage for the hours you have worked. Holiday Pay is the 12.07% of your taxable pay, in this example the employee has chosen this is paid to them each week. Commission, this is the balancing figure for anything earnt over and above minimum wage. These figures together then have tax and national insurance applied to them and deducted.
The second document will look like the below and as you can see, the Gross Pay box from the pay statement is carried across, along with the deductions. This is your Payslip and this is what you would use to show a third party if you were looking for finance etc
Questions we are regularly asked:
Why am I paying 2 lots of National Insurance?
In short you are not, before being a contractor if you were employed your employer would have paid the ER NIC. The umbrella company employs you and therefore is liable to pay employment taxes, and the money has to come from somewhere. In this case, the money comes from the contract rate charged from the Umbrella Company to the agency. The agency passes this increased rate on to the end client and this is how the ER NIC is factored in to your contract rate at the start of the contract.