Agency PAYE or Umbrella PAYE?

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When you undertake an assignment using a recruitment agency, they might provide you with the chance to be paid in a single of 3 distinct ways;

Via your personal Ltd Company;
Via an Umbrella Company; and Via Agency PAYE.

So just how do you understand what path to go down? Well this is determined by a selection of variables.

To begin with, in case you project is claimed as being an Inside IR35 contract, in that case you might very well not have the ability to function via your Ltd Company, unless the bureau is able to generate the required employment deductions.

Okay therefore in case you’re deemed inside IR35, or maybe you determine you don’t want the headache of running via a Ltd Company, then you’ve the possibility of agency or umbrella. This assumes the company has the ability to run the payroll for you, if not then you might be required to work via an umbrella.
Choosing between Agency PAYE and Umbrella PAYE

So in case you’ve been offered the choice to work either via agency PAYE or maybe umbrella PAYE, we’d look to see 2 different rates provided to you reliant on which option you select.

We’d look to see a lower speed offered whether you choose to go on the Agency PAYE route. You will be taken onto the company payroll and will make certain deductions are taken for NI and PAYE contributions before issuing you using a payslip. The speed you’re provided will be deemed your taxable income and could be similar to what you’d find out if you were in regular employment.
Contract Rate vs Taxable Salary

The rate offered for Umbrella PAYE (or maybe Ltd if feasible) will generally be inflated to account for any extra deductions you’d not find out through Agency PAYE. Operating via an umbrella the rate of yours will be deemed as your contract rate and never your taxable income. This is governed by Employers NI, The umbrella and apprenticeship Levy margin before arriving at your taxable income.

Why don’t we check out several rate comparisons paid out on a weekly basis

Agency PAYE Rate (Taxable Salary) 500 each day.
Nets a take home figure of 1,614.00

Umbrella PAYE (Contract Rate) 575 each day.
Nets a take home figure of 1,621.00

The figures above (based on 2019/20 tax figures) reveal that in case you are being presented figures for one or the other method of working on the project well then you will be needing an uplift of around fifteen % for umbrella over agency PAYE.

If you’ve been offered 2 rates and want to see which is right for you, use our Agency PAYE Calculator.