Before joining an umbrella company, it is wise to request a free take-home pay calculation that will show you your estimated pay retention once all the legal deductions have been made (Pay As You Earn). Keep reading for more information about free umbrella company take-home pay calculations.
What is an umbrella company take-home pay calculation?
There are plenty of umbrella companies in the UK to choose from – over 500, according to the Low Incomes Tax Reform Group (LITRG). Therefore, before you request a take-home pay calculation from an umbrella, ensure they’re compliant and are not facilitating tax avoidance.
When you’ve identified a few umbrella companies you’re interested in joining, ask them to provide you with a take-home pay calculation (sometimes referred to as an “umbrella company illustration” or an “umbrella company projection”. This document will showcase your projected net salary based on your assignment. For example, trustworthy umbrella companies will do everything possible to provide you with an accurate calculation and will base the figures they produce on:
- Your rate of pay
- How many days and hours you work each week
- Your tax code
- Whether you are paying into a pension (umbrella companies are legally required to opt you into a pension, but you can choose to opt-out at a later date)
- Whether you are paying back a student loan (type one or two)
- The umbrella company’s margin should also be included in the calculation you receive (taken from the gross amount)
Umbrella company take-home pay calculations are designed to be as accurate as possible. However, your actual pay retention may vary once the umbrella has processed your payroll (due to several factors, including tax code etc.).
Unfortunately, there have been some cases where umbrella companies have deliberately inflated the calculated pay retention of workers as a method of tricking them into using their services over a competitor. It is important you understand how umbrella companies process your payroll – with Pay As You Earn (PAYE) – the government’s tax system. The only income that umbrellas generate for themselves is the margin they deduct each time they process an employee’s payroll.
All compliant umbrellas will process your payroll in exactly the same way. Therefore, in theory, if you were to be paid by two compliant umbrellas – both with the same weekly margin – you should retain exactly the same amount of your money with each (to the penny). If you come across an umbrella offering you a noticeably higher pay retention rate – they are probably trying to trick you, or they might be a tax avoidance scheme (which you should avoid at all costs). For more information, please read our blog: What should you do if you receive inaccurate and unethical pay illustrations from an umbrella company?
What should an umbrella company take-home pay calculation include?
Compliant umbrella companies will provide you with a detailed take-home pay calculation based on the rate of pay you give them. Each calculation should show the following:
- Your name
- Tax code
- Income tax
- Employee’s National Insurance Contributions
- The umbrella company’s margin
- Employment costs (Employer’s National Insurance Contributions and the Apprenticeship Levy)
- Expenses
- Pension contributions
- Student loan repayments
- Holiday pay
- Payment information, including your gross rate and net payment
If you suspect any of your funds are missing or additional deductions have been made on the calculation you’re given, there could be non-compliant activity taking place and you should query it immediately. If you believe an umbrella is acting unethically, you can report them to HMRC, and if they’re a member of the FCSA, you can call the FCSA’s dedicated whistleblowing hotline on 0203 302 5112.
Umbrella company Calculator
The team at umbrellacompanies.org.uk has built a free umbrella company calculator designed to provide you with an accurate take-home pay breakdown. The tool can be used as many times as you want and is available here.
Umbrella Company UK
Our #1 umbrella company, Umbrella Company UK, is an accredited Freelancer and Contractor Services Association (FCSA) member. The FCSA is the UK’s leading professional body committed to ensuring the supply chain of temporary workers complies with HMRC’s rules and regulations. Therefore, you can be confident that Umbrella Company UK values compliance and will provide you with an accurate take-home pay calculation.
Please click here to find out more about Umbrella Company UK and request a free and tailored take-home pay calculation from their professional team. Alternatively, you can call them on 01707 669 023.
Top 10 umbrella companies
We have put together a list of our top 10 umbrella companies and they accredited by either the FCSA or Professional Passport. These umbrellas are well-established within the marketplace, and some have special offers at the moment. Please check them out!
