“PAYE or umbrella?” usually means choosing between agency payroll and an umbrella employer. Both can deduct tax through PAYE. The difference is who employs and pays you, and what the quoted rate includes.
IN PLAIN ENGLISH
Compare your gross wages, not an umbrella assignment rate with somebody else’s gross day rate. Ask for the written steps from the agency’s payment to your take-home pay.
Understand the three different numbers
The assignment rate is what the agency pays the umbrella. It can fund the umbrella’s margin and employer costs before your gross wages are worked out. Gross wages are your pay before your own deductions. Take-home pay is what remains after those deductions.
Employer National Insurance is distinct from your employee National Insurance. Employer costs can be accounted for when converting assignment income into gross wages; they should not be presented as your employee deductions from that gross pay. HMRC’s umbrella guide explains the reconciliation.
Ask for a useful comparison
Request the key information document and an illustration for the actual offered rate and days. Check the umbrella margin, employer costs, holiday arrangement, pension and your gross wages. An illustration is not a promise of identical take-home pay every week: tax codes and personal circumstances can change deductions.
For example, a £200 umbrella assignment rate and a £180 agency PAYE gross rate cannot be ranked just by subtracting one headline from the other. First establish the gross wages under each arrangement, on the same holiday-pay basis. These are illustrative figures, not typical market rates.
Follow the holiday money
Ask whether holiday pay is paid with wages under an eligible arrangement or held to pay when leave is taken. Check the separate entry or balance and the process for requesting leave. Holiday pay explains why “included” and “additional” are different.
Keep the assignment confirmation, reconciliation and payslip together. If their figures do not match, ask payroll to show the calculation from the beginning rather than explaining only the final bank payment.
Be cautious about tax promises
Do not choose a scheme because it promises unusually high take-home pay through loans, advances or unexplained non-taxable payments. Use HMRC’s guidance and seek independent tax advice where necessary. Being introduced by an agency is not a guarantee that every payroll proposal is appropriate.
What this means for you
Before accepting, get the employer’s legal name, pay frequency, complaint contact and written pay breakdown. Ask which payroll options the agency actually offers. Compare supply teacher pay on consistent terms, then allow for travel and unpaid gaps.
Frequently asked questions
Is umbrella employment self-employment?
An ordinary umbrella arrangement normally makes you an employee of the umbrella and uses PAYE. Do not assume a different label removes tax or employment obligations.
Is the highest take-home illustration best?
Check its assumptions and what is missing. Compare gross pay and explained deductions, not a promotional percentage. This guide is general information, not personal tax or financial advice; rights also depend on your contract and jurisdiction.
Related guides
Sources and further reading
Last reviewed: 20 September 2026. Official guidance and individual arrangements can change.