Umbrella Payroll Guidance

We always recommend you keep a copy of your paper timesheet for your records, or should any issues arise, however, we cannot pay you until we receive the electronic timesheet from the place you worked.

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Working for an Umbrella

Who will pay you?

You are paid by the umbrella company because they are your employer. They will:

• pay you for the work you do for Cromwell Medical’s clients
• deduct any Income Tax and employee National Insurance contributions due under PAYE (Pay as You Earn) from your pay
   

How you get paid

Cromwell Medical pays Cromwell Medical for your services.

This rate is different to the rate you are paid from the umbrella company, because of the additional costs for the umbrella company, which include:

• administration costs (sometimes charged separately to you by the umbrella company)
• employer National Insurance contributions
• employer workplace pension contributions
• holiday pay
• other amounts to cover other specific costs, such as Apprenticeship Levy

 

What you get paid

• The rate you get from the umbrella company is sometimes known as your contract rate and should be set out in your employment contract. This is the hourly rate confirmed by your Cromwell Medical consultant, plus another taxable amount often described as a bonus or additional pay. This is your gross pay (your pay before deductions).

• If any of this amount is described as non-taxable, your umbrella company could be involving you in a tax avoidance scheme.

• Your gross pay is then subject to deductions of Income Tax and employee National Insurance contributions through PAYE, as well as any other deductions such as your workplace pension contributions.

• The remaining amount is your net pay (the amount you take home).

• If you think employer National Insurance contributions have been wrongly deducted from your gross pay, or any other incorrect deductions have been made, contact your employer (the umbrella company). If this does not work, contact ACAS (Advisory, Conciliation and Arbitration Service), Citizens Advice or your trade union representative.

 

How to understand your pay

Before you start work you’ll be given a key information document by the employment agency which will include all the details about what you’ll be paid.

Umbrella companies normally give you a listed reconciliation statement and a payslip.

As per the government guidelines, please take precaution if you are selecting an umbrella company. Companies can claim to save tax, but in effect are running tax avoidance schemes. You should check if the Umbrella Company are promising 80, 90 or 95%, only a fraction of your salary is paid through payroll, or you are paid using a loan.

 

Key information document (KID)

What is a Key Information Document?
Arising from The Good Work Plan, Key Information Documents attempt to increase pay transparency for agency workers and provide key information regarding the relationship between the work-seeker and the employment business. On registering with Cromwell Medical you will be asked to review the Key Information Document for your chosen payment provider.

The Key Information Document is intended to improve the transparency of information provided to you, particularly around pay, including an overview of how any fees and deductions will affect your pay.

This will give you information about your pay and other details about your employment. It will show you the deductions and fees in relation to the assignment rate and contract rate and how this affects your gross and net pay.
The document should make it clear what Cromwell Medical will pay the umbrella company and what you will receive from the umbrella company (your contract rate).

 

Reconciliation statement

The reconciliation statement will normally give a breakdown of the assignment rate received by the umbrella company from Cromwell Medical which lists the umbrella company’s costs, including employer National Insurance contributions.

 

Payslip

The payslip will then include a separate breakdown listing your gross pay and deductions, including Income Tax and employee National Insurance contributions, to arrive at the net take home pay.

The payslip must show:

• your pay (which is your contract rate) before and after any deductions
• the amount of deductions — these may change each time you’re paid, for example the amount of Income Tax and employee National Insurance contributions you pay depends on the hours you work
• the number of hours you worked if your pay varies depending on time worked

Your employer is not allowed to make deductions unless:

• they are required by law
• you agree to them
• your contract says that they can

Tax avoidance

Many umbrella companies are compliant with the tax rules but some use tax avoidance schemes.
 

How the schemes work

• Some umbrella companies may claim to allow you to keep more of your earnings than others, which means it could be a disguised remuneration tax avoidance scheme. They could also involve third parties.

• Most tax avoidance schemes simply do not work, including those that may claim to be tax efficient or offer to increase your take-home pay. They sometimes carry high, non-refundable fees and are often provided by, or through, offshore promoters.

• If you are asked to sign an annuity, loan or other agreement involving a non-taxable element of pay, especially if this involves someone other than your employer, it may be a tax avoidance scheme.

• HMRC’s ‘Tax avoidance - don’t get caught out’ campaign helps contractors who are self-employed or employed through an agency or umbrella company to understand their pay arrangements, so they do not get an unexpected tax bill.
   

Check how you’re being paid

Understanding how you’re being paid is the best way to make sure you do not get caught up in tax avoidance.

Checking your payslips and contractual arrangements will help you confirm you are paying the right amount of Income Tax and National Insurance contributions, so you do not get an unexpected tax bill later.
Cromwell Medical Staffing are not entitled to provide financial advice, if you have queries on who you could chose as your preferred payment provider please seek financial advice from The Citizen Advice Bureau or from your accountant or financial adviser.