Key Information Document (KID) – guide for umbrella contractors

KID contractor

All umbrella workers should receive a Key Information Document (KID) from their recruitment agency before starting a new contract.

The KID shows how a worker will be paid and details the relationship between the client and the umbrella company. It also shows which deductions will be made from their pay.

Why did the government introduce the document?

The KID was introduced in April 2020 to ensure greater transparency between workers and employment businesses or agencies.

The changes aim to reduce the confusion created by different quoted contractor pay rates (i.e. the assignment rate paid by the client to the recruiter and the gross rate paid by the umbrella to the worker).

The legal requirements are contained in Regulation 13A of the Conduct of Employment Agencies and Employment Businesses Regulations 2003 (the Conduct Regulations).

Key Information Documents – The Basics

If you are using an umbrella company, the document should state the following pieces of information:

  • Worker’s name
  • The type of contract
  • Name of the employer
  • Name of the umbrella company or intermediary
  • Who employs the worker (usually the umbrella or intermediary)
  • Who will pay the worker (usually the umbrella or intermediary)
  • Any business connection between the employment business and umbrella or intermediary.
  • The rate of pay
  • How often the worker will be paid
  • The details of any statutory that will affect worker’s pay
  • The details of any other deductions (e.g. the umbrella company’s margin)
  • Employee benefits (e.g. holidays etc.)
  • Fees for any goods and services payable by the worker
  • Estimated net payment due to the worker after all deductions have been taken into account
  • Representative example statement

What is a representative example statement?

All KIDs must include a representative example statement which details a worker’s pay and how deductions are applied.

Where the worker is engaged via an umbrella company, the pay illustration includes all deductions from the agreed ‘umbrella rate’ (assignment rate).

The statement states the assignment rate and all deductions, fees, charges and benefits that impact the worker’s gross pay and net take-home pay.

What a typical umbrella company example statement contains

  1. The assignment rate (the total sum paid by the employment business to the umbrella)
  2. Statutory deductions made from the assignment rate (employers’ NI, apprenticeship levy)
  3. Other deductions from the assignment rate (umbrella company margin, employers’ pension contribution, etc.)
  4. The gross rate of pay to the worker (i.e. before any personal tax is paid)
  5. Statutory deductions made from the gross rate (employees’ NI and income tax)
  6. Other deductions from the gross rate (employee’s pension contribution, etc.)
  7. Example net take home pay – paid to the worker’s bank account

Who is responsible for creating the KID?

The employment business (recruitment agency) is responsible for providing the KID and issuing a new KID if any of the information changes.

Employment businesses must rely on any information given to them by umbrella companies, as they may not directly have any data on the contractors they work with.

Are there any rules about how the document is laid out?

The official guidance states that the KID should:

  • Be clearly labelled
  • Contain an explanation of its purpose at the top.
  • Be straightforward to understand.
  • Be no longer than two A4 pages in length
  • Include Contact details of the Employment Agency Standards (EAS) inspectorate

Key Information Document FAQs for contractors

What happens if anything changes in my working situation?

If the information on the KID changes significantly, for example, the person or business responsible for paying you changes or you start paying a new deduction, then the employment business must give you a revised KID with the new details.

The employment business should issue a new KID within five business days.

What happens if I start a new assignment?

A new assignment doesn’t necessarily mean a new KID needs to be issued. If no changes have occurred since you were last issued a KID, and the same payment method applies, there is no need to issue a new document.

Does the KID have to show the exact net take home pay a worker receives?

No, the KID must only reflect a worker’s minimum net pay amount. This is because some deductions will vary throughout the contract.

You can read more in this official guide for umbrella workers.

Our Partner Accountants