Umbrella Company Payslips Explained

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Receiving a payslip is part and parcel of being an employee. Usually, we give it a quick glance on payday and tend not to pay very close attention to anything other than our net pay amount.

It can be confusing when you try to interpret the deductions you see on your payslip, so to sort through any confusion, we’ve created this guide to help you understand what each deduction is for, and how much you can expect to be paying towards it each month.

Deductions on an umbrella company payslip

Employee Pension Contribution

The government introduced the Pension Auto Enrolment Scheme in 2012, as a measure to combat the problem of the UK workforce not saving enough toward their retirement. If you are over 22 years of age and below the state pension age, earn more than £10,000 a year and primarily work in the UK, you will be automatically enrolled into this scheme when working under Parasol.

However, if you are the sole director of a company you will not be subject to Pension Auto Enrolment, provided you inform the Pensions Regulator of your circumstance. You can read more about this topic in our guide to the Pension Auto Enrolment Scheme.

You will see a monthly deduction of 4% of your basic pay into your pension. This is coupled with HMRCs contribution of 1% of your basic pay (taking your total contribution up to 5%), also paid directly into your pension fund.

Employer Pension Contribution: Auto Enrolment and Non-Auto Enrolment

If you are a member of the Non-Auto Enrolment pension scheme, Parasol will retain the “Total Contributions for this Period” amount shown in the Non-Auto Enrolment pension section, and pay this into your Non-Auto Enrolment pension.

National Insurance Contributions

Based on your personal earnings, you will pay National Insurance Contributions (NICs) on all income above the primary threshold.

For the 2022/23 tax year, the primary threshold for NIC is £9,880 per annum, and the upper earnings limit is £50,270. You will pay 12% National Insurance on income from £9,880 to £50,270 and 2% employees' National Insurance thereafter.

From 6 April 2022 to 5 April 2023, the rate of National Insurance has been increased by 1.25 percentage points.

You will also have an Employers National Insurance deduction of 13.8% - which we explain in greater detail under the heading 'Employment Costs'.

Pay As You Earn (PAYE) Income Tax

Pay As You Earn (PAYE) income tax is a deduction made by your employer and paid to HMRC on your behalf.

  • Personal allowance: £242 per week | £1,048 per month | £12,570 per year
  • English and Northern Irish basic tax rate: 20% on annual earnings above the PAYE tax threshold and up to £37,700
  • English and Northern Irish higher tax rate: 40% on annual earnings from £37,701 to £150,000
  • English and Northern Irish additional tax rate: 45% on annual earnings above £150,000

Employment costs

Employment costs refer to Employer’s National Insurance contributions and apprentice levy which is calculated at 14.3% (after allowances).

13.8% is for Employer’s National Insurance contributions and the remaining 0.5% relates to the apprentice levy which all businesses in the UK with a payroll bill of more than £3,000,000 must pay.

You will see this as one deduction on your payslip.

Other deductions

If you have any agreements in place to have deductions from your pay – for example, a pay advance recovery, you will see Net Adjustments reflected on your payslip. This will change month to month and is not a static deduction for all employees. Student Loans work in the same way as this, and will be reflected more specifically under this deduction category.

Perhaps the one area we all tend to focus on is of course the Net Pay section, which shows the amount you will be paid into your account after all the relevant deductions have been taken from your payment.

Reimbursements on an umbrella company payslip

Because you are an employee, your reimbursements will comprise of only two categories; client billable expenses (expenses that are pre-agreed with and paid by the client or agency) - and business costs and mileage (subject to Supervision, Direction and Control (SDC)).

The expenses you’ve specified in your timesheet will be displayed in this section of your payslip, and the total amount you’ll be reimbursed will be shown here.

Invoices that you have raised, and been sent to the client by us, will also be shown in your payslip breakdown.

Coming soon: new features to look out for

The Conduct of Employment Agencies and Employment Businesses (Amendment) Regulations 2019 extend to include Key Information Documents (KID). These are set to be established as an attempt to increase pay transparency for temporary workers and provide information around their assignments.

As an agency worker you’re entitled to receive a KID outlining:

  • The relationship between the ‘employment business’ and you as the ‘work-seeker’
  • The nature of work and the number of hours along with any remuneration or fees which may impact your pay
  • Entitlement to employee benefits such as holiday pay, sick pay and maternity/paternity pay
  • An estimate of the net payment to be issued to you after all deductions have been considered
  • Who the employer is and who is paying you

Here to help

If you need any information on your Parasol payslip or have any questions, you can contact our team by requesting a callback.