The majority of agencies don’t run their own internal payroll for contractors but if they do, you’ll be given the choice between Agency PAYE or Umbrella – but which one is right for you?
When given the choice between each service, your agency should provide you with a comparison of two different rates, one for Umbrella and another for Agency PAYE.
Umbrella
If you opt for the Umbrella route, the contract rate will always be higher than the Agency PAYE rate.
The Umbrella contract rate is inclusive of our employment costs and your holiday pay entitlement.
When we issue payslips to you, the employment costs are retained from the contract rate along with our margin, and the remainder is then reported to HMRC as your taxable income. This is the part that is subject to PAYE and NI.
Please find more detailed information on Employment Costs: https://support.nasagroup.co.uk/knowledge/employment-costs
Agency PAYE
If you opt to go through the Agency PAYE route, the agency pays the employment costs to HMRC in the background (as they employ you directly), hence you will only be shown the basic PAYE rate for the contract, and not the overall assignment rate which includes the employment costs (if you were to go Umbrella instead).
Below, we have listed some key differences between agency PAYE and Umbrella to help you make an informed decision for your contracting needs:
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Agency PAYE |
Umbrella |
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Individual employments |
Continuous employment |
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Private Pensions (SIPP) Salary sacrifice payments may not be available through Agency PAYE. This means you may not be able to benefit from tax relief and NI savings at source.
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Private pension (SIPP) One of the biggest umbrella benefits – we can make employer contributions to your private pension via salary sacrifice. The contributions do not suffer any tax or employee NI deductions, employer NI savings are also passed onto you, maximising your tax savings! (https://support.nasagroup.co.uk/knowledge/private-pensions) |
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Cashback & Retail Discounts Employee reward schemes are may not be available through agency PAYE. |
Cashback & Retail Discounts Huge discounts, Fuel Savings Card, OnlineGP, shopping perks and cashback offers for many of the UKs biggest retailers, both online and in store. (https://support.nasagroup.co.uk/knowledge/new-employee-rewards-programme) |
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Workplace pension You will have access to the agency workplace pension scheme. With each agency that you are employed by will mean a new pension account. You may build up a number of separate pension pots depending on each agency’s chosen pension provider, which can become hard to track. |
Workplace pension Due to the continuity of employment through one Umbrella, you will have one pension pot regardless of how many assignments you have. Our workplace pension is via NOW Pensions. (https://support.nasagroup.co.uk/knowledge/workplace-pension) |
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HR & Payroll support Some agencies may not have large PAYE payrolls in place and if so, it may be a back office function rather than front of house. As such, any support provided may be more basic in nature in terms of HR and payroll. |
HR & Payroll support Umbrella companies are specialists in this area. At Nasa Umbrella, each contractor has an account manager that is allocated to the worker to support any queries around payroll, employment benefits and HR. |
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Statutory employment benefits You will benefit from all statutory benefits |
Statutory employment benefits You will benefit from all statutory benefits |