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  • Crawford Temple

Umbrella Payslips Explained

With the number of contractors working through umbrella companies now estimated at around 400,000 – a figure which is increasing all the time – we look at what information an umbrella company payslip should show so that you can easily read and understand it.

Understanding your payslip


Most umbrella payslips have two parts:

  1. The Pay Report – itemises the income that the umbrella receives and outlines the deductions that have been applied

  2. The Payslip – defines your pay

The Pay Report

This will show you how much your umbrella company has received from your recruitment agency so it’s important that you check it to confirm whether that amount is in line with your expectations and your contract.


With so many disguised remuneration schemes (DRS) littering the market nowadays as a result of the Off-Payroll Legislation it’s vital that you can understand your payslips so that you can spot an erroneous deduction or addition.


You need to understand that DRSs will reduce your income but pay the difference as a separate payment so that no tax will be paid on it. It’s unusual for these amounts to be detailed on the pay report although a good indication that this practice is taking place is where the amount shown as received is below what you would normally have expected.


There are also instances where the hours worked are reported correctly but the rate paid is incorrect – resulting in a reduced receipt. Your pay report should always show you the total that you should receive for working a given period. If it doesn’t, you should question it.


Your pay report should also list any deductions that the umbrella makes – such as their margin and any further deductions for employment costs. Some umbrellas often summarise their employment costs in a single line, so to understand more you should ask for a line-by-line breakdown. The list of deductions should itemise what each is and what its value is and, where it shows both, the values must be reported correctly to ensure that you are not paying hidden charges. If they are not, you can challenge the umbrella about this type of practice which is commonly known as ‘skimming’. If an umbrella refuses your request to provide a full breakdown of costs you should be very wary indeed.

The breakdown should include:

  • Employers’ National Insurance

  • Apprenticeship Levy (where the umbrella qualifies for this scheme)

  • Employer Pension Contribution (if you are enrolled in a workplace pension scheme)

  • The amount of holiday pay you have accrued in the period

If you are unsure about any of these items you should question them.

After any deductions on the pay report, you will see your Gross Pay listed. If you are taking advanced holiday pay this will be added back in to show the total available for Gross Pay. This number should be the same as the Gross Pay shown on your payslip.


The Payslip

If your pay report is correct then the amount you see on your payslip as Gross Pay should match that figure. You’ll see Employer National Insurance and PAYE having been deducted which will leave you a Net Pay figure. This should be the same amount as you receive in your bank account, as a single payment.


Gross Pay is usually broken down into a wage based on the hours you’ve worked at National Minimum Wage, with a bonus for the balance. The hours that you’ve worked should be displayed correctly on the payslip, and if you notice any discrepancies you should contact your umbrella company immediately.


The bonus element of your pay is always taxable, contrary to the claims that some schemes make that it is not. If your umbrella company claims that your bonus is not subject to tax you should take this as a warning that it might not be a compliant provider.


Holiday pay

You may also see a line for Holiday Pay on your payslip. If you’ve requested payment of your holiday pay within a given period, as you are entitled to do, this amount will be on a separate line on your payslip, and will be added to your gross taxable pay.


If you have requested advanced holiday pay – where any holiday pay entitlement is paid out with each week’s wages as an advance – this will be shown as ‘advanced holiday pay’ on your payslip and should be added to the other elements of your pay to make your gross taxable pay figure.

Workplace Pension

If you have enrolled into a workplace pension you’ll see your pension contributions listed as a deduction.


Be vigilant

If the amount you receive in your bank account varies from what you expected, or it’s made up of more than one payment, this is an indication that something is very wrong, and alarm bells should ring loudly.


Different umbrella companies’ payslips and pay reports will vary depending on the payroll software that they use but they should all follow the same general approach as we’ve outlined here, and there should only be slight variations.


If you have any suspicions that something is untoward when it comes to your payslips, question and challenge it to ensure that you have clarity. If you don’t like what you hear you can report it to us here or to HMRC directly, here, and you should close your account with your current umbrella. There are many compliant umbrellas to choose from – we recommend that you make your selection from our list of approved providers here, all of which have met our strict compliance standards to ensure that you meet HMRC’s guidelines and safeguard your own livelihood.

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