Agency PAYE vs Umbrella Company

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So you’ve secured an assignment via a recruitment company, but what happens next? Well, you’ll typically be offered two different pay rates for you to choose between.

Because we’re with you all the way, we can provide you with all the information you need to make an informed decision. In this guide, we take a closer look at the differences between agency PAYE and umbrella companies.

The differences between agency PAYE and umbrella companies

Your first option is to work via an agency on a Pay As You Earn (PAYE) basis, meaning you won’t have to worry about completing tax returns.

Alternatively, you’ll be given the option of joining an umbrella company, such as Parasol. As with agency employees, umbrella contractors escape the hassle of filling out tax returns. This leaves them free to concentrate on their assignments.

So what’s the difference between both options? The answer is quite a bit, as this table shows:

Agency PAYE

Umbrella PAYE

Easy to set up Y Y
Receive statutory benefits such as sick and holiday pay N Y
Claim legitimate business costs and expenses N Y
Higher rate of pay N Y
Work with multiple agencies N Y













As we hope you can see, joining an umbrella company is by far the better option. Not only will you be free to work with a number of different agencies, you can also claim legitimate business costs and expenses and receive employment rights and benefits usually afforded to traditional permanent workers. Seems like a no-brainer, doesn’t it?

Are there any other options for contractors?

Well actually, this isn’t the end of the story. That’s because these aren’t the only options available to contractors, they’re just the ones typically offered by agencies. Two other options include operating as a sole trader or through a limited company.

Don’t worry though, as we’ve created a guide that explains the pros and cons of the following options:

  • Agency PAYE
  • Umbrella company
  • Limited company
  • Sole trader

Need more help?

If you’d prefer to discuss your different options with somebody, we’re here to help. Our dedicated team is on hand to provide unbiased guidance that is based on your own circumstances, so you can be sure to choose the route that’s right for you.

To get the best advice, contact our team today on 0800 464 0412 or email