Important Information
What is an Umbrella Company?
An umbrella company acts as a single “portable employer”, you take it with you while working on different assignments and/or with different agencies to pay you for work you undertake. Hence the term “umbrella”. You are employed by the umbrella company under an overarching contract of employment which covers you for each assignment.
As your employer we will ensure that the correct statutory deductions (tax, national insurance, pensions, etc) are calculated, deducted from your earnings and paid across to the relevant authorities each time we process a payment for you. There should be no tax return or any financial reporting for you to do at the end of the financial year. In essence it is much the same as having a permanent job.
How an umbrella company works:
- The umbrella contracts with your agency
- The umbrella invoices your agency for the hours you have worked
- The agency pays the umbrella
- The umbrella deducts the employments costs and retains its margin
- The umbrella pays you net of your statutory deductions (PAYE, NICs, pension)
- The umbrella pays the statutory deductions to HMRC and your pension contributions to NEST
The key features are:
- You are employed by the umbrella
- You have no administrative burdens during your employment
- You have a single continuous employment across multiple assignments
- You are usually covered by the umbrella insurances
- You are notified by SMS and email when payments are made
- Your pensions contributions are kept up-to-date
How you get paid
When you have completed your weeks work you will need to submit a timesheet to your agency according to their deadlines (unless they instruct otherwise). If you are working directly with an end-client you will need to submit a timesheet to us via the ConnectPaye portal.
Once your agency/end-client have approved the timesheet they will then remit the funds to us, and you will be included in the payroll on the day we receive those funds. We will deposit your net pay into your personal bank account on the same day and notify you via email and SMS to let you know you are being paid. Your pay slips will be available to you on the ConnectPaye portal. If you prefer to get paid on a set day of the week or month please let us know.
Calculations
We will bill your agency/end-client for the hours you have worked at the Agency Pay Rate. The Agency Pay Rate is the total of (a) your gross pay rate, including provision for paid leave entitlement, plus (b) provision for Employers NI and Company Pension contributions and Apprenticeship Levy (the Company Overheads) and (c) our service fee. The Agency Pay Rate is NOT the rate payable to you as gross pay.
Your income tax (PAYE) and Employees NIC is based on your Gross Taxable Pay. Your Gross Taxable Pay is the Agency Pay Rate less the Company Overheads and our service fee. You may also have a student loan, pension contributions and perhaps other deductions from time to time. Once we have included these deductions, we arrive at your Net Pay, and this is the amount that is paid into your bank account.
The breakdown shown below gives you an example of what we have described above, if you would prefer a “tailored” illustration please let us know.
| Per hour | Per week | |
|---|---|---|
| Agency Pay rate | £15.00 | £562.50 |
| Employers NIC | £1.14 | £42.73 |
| Apprenticeship levy | £0.06 | £2.39 |
| Company pension | £0.29 | £10.76 |
| Connectpaye Fee | £0.67 | £25.00 |
| GROSS PAY | £12.84 | £481.62 |
| Tax | £1.16 | £43.60 |
| Employees NIC | £0.95 | £35.47 |
| Pension contribution | £0.38 | £14.34 |
| NET PAY | £10.35 | £388.21 |
The pay slip
Your earnings (Gross Salary) are usually split into three elements on the pay slip:
- Your Basic Pay, which is the National Minimum Wage (NMW) for each hour that you worked. This proves that we are fully compliant with NMW legislation.
- If you have opted to have your Holiday Pay advanced to you each week, this will be shown separately to other income. If you have opted to accrue your Holiday Pay and ask for it to be paid when you need it, the total accrued will be shown in the holiday pay section of the pay slip. Holiday Pay is calculated at the statutory rate which is 12.07% of your taxable earnings.
- The remainder (Gross Salary minus Basic Pay minus Holiday Pay advanced) is paid out to you as a Bonus, which you will see on the pay slip as Bonus (DPSB). The DPSB is still subject to tax and NI just like your basic pay.
Your deductions will show the Income Tax (PAYE), Employees NIC, Pension Contributions and any other amounts that we are required by law to deduct. The statutory taxes are paid directly to HMRC and your pension contributions are paid to our Workplace Pension Provider (NEST). We report the statutory tax deductions to HMRC on a daily basis.
Our fee
We have a competitive fee to suit your working patterns. There are no fees for weeks that you do not work, and there are no joining or termination fees
My ConnectPaye portal
We pride ourselves on being transparent and helpful. We understand that tax and pay can sometimes be complicated. As a result, we advise you to take time to read all the material we send you.
We strongly advise you to log onto your My ConnectPaye portal so you can view your billings, payments, pay slips, contract documents, submit timesheets and expense claims, change your holiday pay method, request holiday pay to be paid, notify us you are on leave, and much more.