Umbrella companies often run both standard umbrella payments, and PEO model payments. What difference does this make for a contractor?
The short answer, is very little!
PEO stands for Professional Employer Organization. In this scenario a third-party company (in this case Nasa) offers organizations the option to outsource their HR functions, allowing them to focus on core business operations.
Umbrella payments, like any PAYE solution, have the same deductions applied. When comparing PEO versus Umbrella, we need to break down these deductions, and when they are made.
💡 The overall take home pay would be exactly the same across both services, so neither will leave contractors better or worse off. The only difference is the process in which payments are run, and how payslips are generated. 💡
What is shown on each type of payslip?
| Payslip Item |
Umbrella |
Umbrella PEO |
| Employer NICs |
✅ Included in the overall Assignment Rate, this is then retained by the Umbrella, and shown on the payslip breakdown. Once all employment costs have been retained, this leaves the taxable pay for personal tax and NI to be applied. This is made up of the basic rate + holiday pay. |
❌ Under the PEO model, NASA will invoice your agency for the Employment Costs separately, so it is not included within the assignment rate. This means you will only see the basic rate + holiday pay entitlement on the payslip, and Employment Costs are handled in the background by us. |
| Apprentice Levy |
✅ As above, this is included within the Assignment Rate from the agency, and NASA retain this. This is shown on payslips. |
❌ As above, this is invoiced separately to your basic pay, and will not be shown on your payslips. |
| Umbrella Margin |
✅ The agreed umbrella margin will be shown on your umbrella payslips, and detailed in your agency assignment paperwork for reference. |
❌ You will not see the Umbrella margin on your payslips, as the agency will be paying this to NASA alongside the employment costs. |
| Employer Pension Contributions |
✅ If you're opted in to the AE workplace pension, this is shown on NASA payslips under deductions. |
❌ If you're opted into the workplace pension, only the employee part will show on your payslips. |
| Umbrella Margin |
✅ The agreed umbrella margin will be shown on your umbrella payslips, and detailed in your agency assignment paperwork for reference. |
❌ You will not see the Umbrella margin on your payslips, as the agency will be paying this to NASA alongside the employment costs. |
| Employee National Insurance |
✅ |
✅ |
| Employee Tax |
✅ |
✅ |
| Student Loans |
✅ |
✅ |
| Court Orders / CSA Payments | ✅ | ✅ |
Comparing Both Models:
The net / take home pay remains the same for each option. We've included an example of how each agency rate might break down below:
Basic Rate of Pay: £18 per hour
Holiday Pay @ 12.07%: £2.17 per hour
Employment Costs: £3.66 per hour
PEO Model
Rate to contractor, shown on assignment paperwork and payslips. Made up of basic pay + holiday pay, employment costs are paid in the background to the umbrella company.
✔ £20.17 per hour
Umbrella Model
Overall contract rate shown on assignment paperwork and payslips. Made up of basic pay + holiday pay + all employment costs. Umbrella company retains employment costs, and the remainder (£20.17 ph) is the taxable pay owed to the contractor.
✔ £23.83 per hour
The recruitment agency will decide on the method any payments are processed. Our default approach will always assume standard payments via the umbrella.
📧 If you have any questions about this service, please contact sales@nasagroup.co.uk and we'll be happy to help.