When you become an umbrella company employee, you should receive a payslip every time your pay is processed.
This guide explains what each entry on a payslip means and why it is there.
Umbrella company payslips can look confusing because your assignment rate is reduced before tax is calculated. This includes employment costs such as Employer’s NI, the Apprenticeship Levy and the umbrella’s margin – meaning your “gross pay” is not the same as your contract rate.
This article has been updated for the 2026/27 tax year
Personal information
Your payslip includes your personal information, such as your name, address, and National Insurance number.
If this information is incorrect or you have recently changed your address, please let your umbrella company know immediately.
Tax code
Every employee has a tax code, which tells the employer how much income tax to deduct from pay and send to HMRC on your behalf. Pension providers also use your tax code.
The most common tax code in the UK for the 2025/26 tax year is 1257L, which means you are entitled to receive the £12,570 tax-free allowance.
If you ever suspect you have an incorrect tax code, you can contact HMRC for clarification.
If your tax code changes, you will receive a letter in the post with your new code, and so will your employer, allowing them to update their system and pay you accordingly.
Assignment rate
Unsurprisingly, your payslip will include your assignment rate – the amount you have agreed to be paid in exchange for the work you complete for your end client.
The assignment rate is your gross pay plus an allowance for employment costs. These employment costs include employers’ NICs, the umbrella’s margin and the Apprenticeship Levy. See below.
Typical umbrella payslip breakdown:
- Assignment rate – your agreed contract rate (before any deductions)
- Employment costs – Employer’s NI (15%) + Apprenticeship Levy (0.5%) + umbrella margin
- Gross pay – the amount left after employment costs
- PAYE deductions – income tax and employee’s NI
- Net pay – what you actually receive
The employment costs
The concept of employment costs confuses many umbrella employees – especially those new to using an intermediary for payroll purposes.
The employment costs include the employer’s national insurance contributions and the apprenticeship levy (more information below). They are passed on to the worker and will be stated on an umbrella company payslip.
Before you join an umbrella, you must understand the employment costs and ensure they’re taken into account when you negotiate your rate of pay with your recruitment agency or end client.
In theory, if you decide to use an umbrella company for your payroll, you should be issued an inflated rate of pay to consider the employment costs to ensure you don’t pay for them out of your pocket.
More and more agencies now offer two rates of pay—a standard rate for agency PAYE and an inflated rate for those opting to use an umbrella.
If you believe your agency has not considered employment costs in determining your rate of pay, speak with them as soon as possible.
It’s important to remember that your umbrella company is not retaining these deductions or profiting from them.
- Employer’s national insurance contributions: 15% on pay above £5,000 per year.
- The apprenticeship levy: 0.5%
The umbrella company’s margin
The only income an umbrella company retains is the margin it deducts, which should have been disclosed before you registered with them.
Usually, umbrella company margins are applied weekly or monthly and vary between providers.
You should expect to see the UK’s leading umbrella companies offering their payroll service for a weekly margin between £15 and £30 (or £60 to £120 per month).
The umbrella company margin will be deducted from your gross pay, meaning you save on the tax. Therefore, a £15 per week margin doesn’t leave you out of pocket by £15. The margin should be clearly stated on your payslip.
Holiday pay
When negotiating your pay rate, you must consider holiday pay. As an employer, your umbrella company must legally show holiday pay on your payslip.
However, the amount shown is a reallocation of your pay, meaning the 12.07% holiday pay is taken from your assignment rate (gross pay) and shown as holiday pay on your payslip.
Compliant umbrella companies will ensure you are issued with your holiday pay each time you are paid, or that it accrues so you can claim a lump sum later.
Before joining them, you must discuss this with your umbrella and understand how holiday pay will be processed.
While most umbrella companies process holiday pay transparently and in compliance, there have been a few recent accusations that some umbrella companies have retained employees’ holiday pay for themselves.
This is entirely unacceptable. If you believe your umbrella company has withheld your holiday pay, you should report them immediately.
Pension contributions
Umbrella companies must legally enrol all employees into a pension plan within three months. However, if you prefer to opt out, that’s fine, though you can only do so after you’ve made your first contributions.
The system isn’t very efficient, but it’s a legal requirement, and umbrella companies must follow the rules.
Your pension contributions will appear on your umbrella company payslip. If you decide to stop making them, the amount should be zero.
Umbrella company employees are responsible for both the employee and employer pension contributions.
Student loan repayments
If you are currently repaying a student loan (any plan), you will automatically have your deductions taken from your gross salary by your umbrella company. No deductions would appear on your payslip if you didn’t have a student loan.
Gross pay
This is your income after the employment costs have been deducted.
You will pay income tax and employees’ NICs on your gross pay.
Income tax (PAYE)
Umbrella companies process payroll in accordance with HMRC’s tax system for employees called Pay As You Earn (PAYE).
The amount of income tax you pay depends on the amount of money you earn throughout a tax year.
For example, if you earn below the personal allowance of £12,570, you will not be responsible for paying any income tax. However, once you earn over the personal allowance, income tax applies.
Below are the income tax thresholds for the 2026/27 tax year:
- Personal allowance: £0 – £12,570
- Basic rate tax (20%): £12,571 – £50,270
- Higher rate tax (40%): £50,271 – £125,140
- Additional rate tax (45%): £125,140+
For example, an employee with an annual income (gross) of £60,000 will benefit from £12,570 tax-free. They then pay 20% tax on income up to £50,270, with 40% applying above this threshold.
A £100,000 abatement applies to higher earners and needs to be taken into account. Many umbrella companies will not include this in take-home pay calculations, so be aware.
For every £1 over £100,000 you earn within a tax year, you will lose £1 of your personal allowance.
Employee’s national insurance contributions
Employees who earn more than £12,570 per year will see Class 1 National Insurance contributions on their payslips.
- £12,570 – £50,270 per year: 8%
- Over £50,270: 2%
You can double-check the current official NI rates here.
Total pay (your net salary)
Your payslip will show your net salary — the amount you receive after all deductions.
Year-to-date figures (tax and NICs)
Your payslip will also show year-to-date figures, including total tax, national insurance, and earnings since 6 April.
Payslip checking software
Try an online payslip checker to ensure that your umbrella company is deducting the correct amounts. More providers now use tools such as SafeRec to demonstrate compliance.
