Your Umbrella Payslip Explained
Umbrella company payslips can be confusing, but here at Clarity we like to ensure you understand exactly what you are getting so let us explain how they work…
Your payslip will show usually show the value of your invoice(s) that we have received cleared funds for. On occasions however, you may see the living wage for the period worked. This will only ever happen if we have not received funds before the end of the month on which they are due and we will ensure that we keep you up to date in situations like this. Payment is made by Same Day Transfer and should clear in your account by close of business on that day.
In order to assist you with understanding your payslip, we have listed below the most common queries that arise. So let’s take a look at Your Umbrella Payslip Explained…
The Gross Payment figure shown on your payslip is based upon the minimum wage/living wage portion of your earnings, allowing for the statutory deduction of pension contributions.
If your agency or client has agreed to reimburse you for your expenses then we can process these as a chargeable expense. They will be invoiced to the client and we may even ask for an expense form, signed by the client, to support your claim. These costs will need to be entered onto the timesheet expense section of the portal.
From the contract value, we deduct the gross payment. The balance is subject to Employers National Insurance and the Apprenticeship Levy, once these deductions have been made the remaining amount is treated as your bonus payment.
UMBRELLA HOLIDAY PAY
As an employee of Clarity you are entitled to 28 days holiday each financial year (per annum pro rata). Holiday pay must be shown as a separate entry on your payslip when you take annual leave rather than included within your pay rate.
As standard, we will make a holiday allowance (as per HMRC guidance), this is calculated at 12.07% of the taxable salary, and is taken from your contract rate. We repay this every time we make payment to you. Opting for this scheme means there will be no retained holiday pay available when you do take holiday.
Alternatively, if you would like we can arrange to retain a holiday allowance for you. You will be able to view any holiday you have accrued and reclaim it as and when you require via the online portal. Please note if you choose this option then holiday pay is taxed at the point it is retained, and not at the point it is repaid.
PAYE TAX & TAX CODES
The PAYE Tax figure shown on your payslip is the income tax we are required to deduct from you and pay to the government. The amount deducted is based on the tax code operated which will have either been advised to us by the tax office, or, if you are a new contractor, via your P45 or HMRC Starter Checklist form. Your tax code is shown in the bottom left hand corner of your payslip. If you believe your code is wrong, please contact HMRC to request a revised coding. You will need to have your NI number and our Employer Reference Number handy when calling and their telephone number is 0300 200 3300.
EMPLOYEE NATIONAL INSURANCE
Legislation requires all employees to pay a national insurance contribution based on their earning (unless they are exempt by virtue of being over retirement age and have provided us with the required evidence). This is shown on your payslip as EEs National Insurance. As of 6th April 2022, this is 12% +1.25% (Social Care Levy), to total 13.25%.
EMPLOYERS NATIONAL INSURANCE
All UK employers, including umbrella companies, are required to make payments each month to Her Majesty’s Revenue and Customs (HMRC) for Employers’ National Insurance Contributions. From 6th April 2022 this contribution is taken as a percentage of 13.8% +1.25% (Social Care Levy), so a total of 15.05% of earnings over the annual limit.
The Apprenticeship Levy is taken as 0.5% of earnings subject to Class 1 Secondary NICS. As an employee who is paid through PAYE (Pay As You Earn) your salary is linked to the contract rate, from which the payment will be made prior to your taxable salary being made available.
Employment law requires employees to receive a minimum amount of pay for each hour worked. The rate is reviewed on an annual basis. We base our minimum wage rates upon the London Living Wage. If you submit a timesheet to us showing hours you have worked but we do not receive payment from your agency before the end of the month, we will make a Minimum Wage payment to you. This will be based on the hours submitted and the prevailing minimum wage rate. When we finally receive payment from the agency, we will pay you the balance of what is due.
Sometimes it is necessary for us to roll back (reverse) your last payment. This will usually be because we receive funds for another timesheet within the same payroll period as one that has already been paid. The PAYE system only allows for one payment to be made each week/month, therefore if we receive 2 payments from your agency/client within the same payroll period, the first has to be cancelled from our payroll system (this is referred to as a ‘roll-back’) so that we can process the two payments as one. The total of both payments are added together and resubmitted through payroll so that the correct PAYE tax and national insurance (NI) contributions are calculated on the overall payment.
The new payslip that we send you will replace the first payslip. As a physical payment will have been made to you when we processed the first invoice we will show a deduction for the net figure paid called ‘Already Paid’ to arrive at the amount that will be paid into your bank account for the second invoice. Most employees have a tax free allowance which is based on their tax code and this is divided by the number of weeks or months in the tax year and a proportion applied to each payment. Only one tax free allowance can be applied in each payroll period. Please note that as your tax free allowance for the period will have been used against the first payment you will find that the overall percentage of PAYE tax and NI deducted against the second payment will be higher as the full amount will be subject to tax and NI.
ALREADY PAID IN ONE TAX PERIOD
If we make a payment to you and then receive payment for a second or subsequent timesheet within the same tax period we are required to add the invoices together for tax and NIC purposes. To do this, we have to reverse (roll back) the first payment and re-process the payment for both the invoices together. As you will have received a payment for the first calculation, we show this amount as ‘Already Paid’ on your new payslip to arrive at the amount due for the second invoice.
This is a deduction we have been instructed to make to repay your Student Loan. The amount deducted is forwarded to the government for credit to your Student Loan account.
We have received updated guidance from the Pensions Regulator. We were initially advised that a threshold should be applied to the auto enrolment deductions that we were making, however, we have now been advised that the employee contributions of 5% and the employers contributions of 3% must be applied to your contracted salary which is based on the London Living Wage. The correct deductions are shown on the attached payslip.
As an employee of Clarity Umbrella, you have access to our Employer Pension Scheme which is operated by Nest. The scheme is designed to provide you with a low cost, flexible plan to reflect and adapt to the terms of the contracts you accept and ensure that you can continue to fund for your retirement whilst maximising your tax benefits.
If you are in the pension scheme, the total amount shown on your payslip & statement will be paid over to the scheme for you.
This is the amount that will be paid into your bank account. Please ensure you advise us of any changes to your account details so that your payments are made to the correct account.
Our margin is the amount we retain from the invoices we raise on your behalf for the work you undertake, this is a fixed amount for each week/month.
We hope the above has helped to explain your payslip. However, if you do have any questions please do not hesitate to contact our Payroll department. Alternatively, you can speak with your Point of Contact who will also be happy to help.