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The Umbrella Company Payslip

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As a freelance contractor, it's pretty hard trying to find a decent umbrella payroll provider to manage your invoicing and tax affairs. Once you've actually started working, the next challenge is to understand your umbrella company payslip.

As we have said many times, one of the most important characteristics of any umbrella payroll provider is the way they treat their contractors. Or to put that another way, their standard of customer service. If you ever need to compare umbrella companies, this is where you should start.

Most umbrella company contractors need a little bit of guidance and reassurance, particularly when they first start working in this way. One of the biggest mistakes an umbrella payroll provider can make is to not fully explain or breakdown a contractor's payslip.

Money, after all, is an emotional subject which is why people tend to shout very loudly when they're not given the information they need, and in a format they can understand.

Employer's National Insurance

A recent study found that this one subject accounts for over 86% of all questions relating to umbrella payroll. The fact is, as a contractor, it's YOU that ultimately has the Employer's National Insurance deducted from your gross invoice. You could be working through a tiny local provider or the biggest and best umbrella company in the UK,  it really doesn't matter - they're still going to be taking Employer's National Insurance out of your hard earned money.

There are several reasons why this is the case, but the sooner you get your head round this, the easier it will be to understand your payslip.

Umbrella Payroll - The Payslip

The actual payslip is fairly straightforward once you know what to look for. The first thing to do is to make sure that the gross invoice (or gross receipts) are equal to the number of hours (or days) you have worked multipled by your hourly (or daily) rate. Pretty simple right? If there is a discrepancy, get straight on the phone to your umbrella company. You might also want to check that your timesheet has been filled out correctly.

Next take a good look at the gross (before tax) deductions. These include any expenses you have claimed,. child care vouchers, pension payments, the umbrella's admin fee, holiday and sick pay deductions and finally our good friend Employer's National Insurance. There shouldn't be anything untoward in here provided your expenses have been processed correctly.

Gross Invoice


Child Care Vouchers
Accrued Holiday Pay
Accrued Sick Pay
Umbrella's Admin Fee
Employer's National Insurance


Gross Salary

After deducting the above items from your gross invoice, you will arrive at your gross (taxable) salary. This is the point where your payslip starts to look like everyone else's in the UK. Income tax and employee's national insurance are calculated and taken out of your gross salary to arrive at a net take home amount. This is combined with any expenses you have claimed and transferred to your personal account each pay day.

Gross Salary


Income Tax
Employee's National insurance


Net Salary (plus any expenses) = take home for the week or month

Umbrella Company League Table

Now that you know what your payslip is supposed to look like, you may want to consider joining an umbrella company. For the most comprehensive review of the top umbrella companies in the UK, head on over to our umbrella company league table.

Further reading

How to compare umbrella companies - a contractor's guide
Contractors beware - not all Umbrella Companies are the same
Umbrella companies - another case of HMRC examination
Umbrella Companies cause HMRC to flex its muscles
What Freelance Contractors Should Know About Umbrella Companies
Does your umbrella company take responsibility?
Whats so special about 24 months?

© 2009 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Weston Master, detail by George Rex

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