As an employee of an umbrella company, you can often find that your quoted Daily rate differs significantly from the Gross Taxable Pay due to deductions paid for by yourself instead of the company.
- Hidden Costs & Deductions
Umbrella companies charge admin fees that eat into your earnings. They also pass employer’s NI contributions (13.8%) and, if applicable, the apprenticeship levy and pension contributions. - Reduced Take-Home Pay
Many agency workers expect a higher salary, but after deductions, they often take home less because of the taxes placed onto them, and not the employer - something direct employees never have to cover. - Lack of Transparency
Payslips can be confusing, with multiple deductions that aren’t always clear. Some workers don’t realise how much they’re losing until it’s too late.
An example of a payslip issued by an umbrella company highlights the deductions an individual must cover instead of the employer. In a direct employment setup, these costs would typically be paid by the company.
In this case, the quoted daily rate is £185, but after deductions, the gross taxable pay is reduced to £138.44 per day—a difference of £46.56. This effectively means your actual daily rate is £138.44, which is then subject to PAYE deductions.
- Less Job Security & Fewer Benefits
Umbrella employees often don’t receive the same protections as direct employees. Holiday pay, sick leave, and furlough support (as seen during COVID-19) can be significantly worse. - National Insurance Increases
From April 2025, umbrella workers will see an additional 1.2% NI deduction, plus a lower NI threshold, meaning even less take-home pay.