Payroll Models Explained

Umbrella PAYE

Target Market

Contractors seeking a PAYE solution with at least £10.00 per hour earning and not caught by SDC Test and/or can claimable expenses legally

How it works?

Pay Calculation

  • Company costs such as ERNI, Employer Pension & Apprentice Levy are taken off from contractor’s Timesheet Earning.
  • Umbrella margin deducted before tax
  • Expenses processed as tax-free reimbursement

Processing

  • Timesheets sent by Agency and imported (or) by Contractor using Mobile App or Portal
  • Agencies billed automatically. Invoice consolidation and customisation supported.
  • Agency Receipts downloaded, auto allocated
  • Payroll run automatically
  • Payment made from within the software interface (no need for BACS/Faster files)
  • Payslips emailed and SMS sent

Compliance

  • Holiday Pay calculated paid out or retained
  • NMW & LMW rules applied and protected
  • Statutory Sick, Maternity, Paternity, Adoption payments calculated and paid out
  • Attachment orders processed and deducted
  • Student Loan deductions made
  • VAT on Expenses claimed automatically via VAT100

Standard PAYE

Target Market

Agencies looking for outsourced PAYE services.

How it works?

Option 1

Contractors remain employees of the Agency and the payroll is processed under Agency’s PAYE Reference

Option 2

Contractors become employees of Umbrella and paid under Umbrella’s PAYE Reference

Pay Calculation

  • Contractor’s salary processed on the entire timesheet earning
  • Agency is billed for ERNI, Employer Pension, Apprentice Levy and Payroll processing fee

Processing

  • Timesheets sent by Agency and imported (or) by Contractor using Mobile App or Portal
  • Agencies billed automatically. Invoice consolidation and customisation supported.
  • Agency Receipts downloaded, auto allocated
  • Payroll run automatically
  • Payment made from within the software interface (no need for BACS/Faster files)
  • Payslips emailed and SMS sent

Compliance

  • Agency may roll-up the holiday pay in the rate or retain it
  • NMW & LMW rules applied and protected
  • Statuary Sick, Maternity, Paternity, Adoption payments calculated and paid out
  • Attachment orders processed and deducted
  • Student Loan deductions made

Joint Employment Model PAYE

Target Market

Agencies supplying to healthcare sector and startup agencies that pays hefty invoice discounting charges. As a joint employer with the agency, Umbrella can invoice the agency without charging VAT.

How it works?

Joint Employment Model PAYE

The agency and the umbrella company become the joint employer of the workers. The workers sign an employment contract that clearly specifies two employers: Agency and Umbrella.

Under this arrangement, the Umbrella can invoice the Agency for all the employment costs without VAT. Money is then transferred to the Umbrella without VAT, for processing salary payments. This is because, for the purpose of payroll, the two entities are deemed to be one.

Under JEM, workers can be paid under “Standard PAYE” or “Umbrella PAYE”.

Standard PAYE

Agency pays Umbrella all employment costs that includes Timesheet earning, Employer NI, Employer Pension, Holiday Pay and Apprentice levy. The worker gets paid just like a normal employee without incurring any reduction from the Timesheet rate. Umbrella charges Agency a payroll processing fee.

Umbrella PAYE

Agency pays Umbrella only the Timesheet earning. The worker bears the cost of employment costs such as Employer NI, Employer Pension, Holiday Pay and Apprentice levy etc. Umbrella charges the agency a payroll processing fee subject to VAT.

Reference: Paragraph 3.2 of Supply of staff and staff bureaux (VAT Notice 700/34)

Fixed Take Home Umbrella

Target Market

Contractors seeking a PAYE solution with a guaranteed take home as a percentage of the timesheet earning. Best suited for the contractors who can legally claim expenses.

How it works?

Pay Calculation

  • Company costs such as ERNI, Employer Pension & Apprentice Levy are taken off from contractor’s Timesheet Earning.
  • Tax free reimbursement (expenses) and Margin are determined based on % take home agreed with the contractor
  • The margin may be positive or negative depending on variables such as company costs and expenses.

Processing

  • Timesheets sent by Agency and imported (or) by Contractor using Mobile App or Portal
  • Agencies billed automatically. Invoice consolidation and customisation supported.
  • Agency Receipts downloaded, auto allocated
  • Payroll run automatically
  • Payment made from within the software interface (no need for BACS/Faster files)
  • Payslips emailed and SMS sent

Compliance

  • Holiday Pay calculated paid out or retained
  • NMW & LMW rules applied and protected
  • Statuary Sick, Maternity, Paternity, Adoption payments calculated and paid out
  • Attachment orders processed and deducted
  • Student Loan deductions made
  • VAT on Expenses claimed automatically via VAT100

Self-Employed CIS

Target Market

Agencies supplying labour services in the construction sector, Construction businesses and self-employed sub-contractors working in the construction industry.

How it works?

Timesheets are sent by the agencies, construction companies or sub-contractors to the Umbrella company. Umbrella bills the agency/construction company and pays the sub-contractor after making appropriate CIS and margin deductions.

Pay Calculation

  • Umbrella margin deducted from the Timesheet earning
  • CIS Tax deducted at 30% or 20% or 0% depending contractor verification status
  • Additional deductions such as Insurance, PPE cost can be applied as well

Processing

  • Timesheets sent by Agency/Construction company (or) by the sub-contractor using Mobile App or Portal
  • Agency/ Construction company billed automatically. Invoice consolidation and customisation supported
  • Agency Receipts downloaded, auto allocated
  • Self-Bills on behalf of the sub-contractors generated and emailed automatically
  • Payment made from within the software interface (no need for BACS/Faster files)
  • Self-Bills emailed to sub-contractors and SMS sent

Compliance

  • Domestic Reverse Charge rule applied on both Sales Invoices and Self-Bills based on settings
  • Sub-contractor’s status tracked, verified and updated automatically (Gross, 20% or 30%)
  • Sub-contractors are reverified automatically after specified number of days
  • CIS300 Returns submitted
  • VAT100 Returns submitted

Self-Employed Gross

Target Market

Self-employed contractors working outside the construction sector and not caught by the false self employment legislation.

How it works?

Timesheets are sent by the agencies, construction companies or sub-contractors to the Umbrella company. Umbrella bills the agency and pays the sub-contractor after making a margin deduction.

Pay Calculation

  • Umbrella margin deducted from the Timesheet earning
  • Additional deductions such as Insurance, PPE cost can be applied as well

Processing

  • Timesheets sent by Agency/Construction company (or) by the sub-contractor using Mobile App or Portal
  • Agency billed automatically. Invoice consolidation and customisation supported
  • Agency Receipts downloaded, auto allocated
  • Self-Bills on behalf of the sub-contractors generated and emailed automatically
  • Payment made from within the software interface (no need for BACS/Faster files)
  • Self-Bills emailed to sub-contractors and SMS sent

Self-Employed PAYE

Target Market

Self Employed individuals who are caught by the false self-employment legislation introduced in April 2014. Refer https://www.gov.uk/government/consultations/onshore-employment-intermediaries-false-self-employment

How it works?

This payment model complies with the legislation by treating the Self-Employed Contractors as Employees for Tax & NI purpose. However, for all other purposes such as Holiday Pay & NMW, SSP, SMP, SPP etc. the contractors are treated as self-employed.

Pay Calculation

  • Company costs such as ERNI, Employer Pension & Apprentice Levy are taken off from contractor’s Timesheet Earning.
  • Umbrella margin deducted before tax
  • Expenses processed as tax free reimbursement

Processing

  • Timesheets sent by Agency/Construction company (or) by the sub-contractor using Mobile App or Portal
  • Agencies billed automatically. Invoice consolidation and customisation supported
  • Agency Receipts downloaded, auto allocated
  • Payroll run automatically
  • Payment made from within the software interface (no need for BACS/Faster files)
  • Payslips emailed and SMS sent

Compliance

  • Holiday Pay is optional
  • NMW & LMW do not apply
  • Attachment orders processed and deducted
  • Student Loan deductions made
  • VAT on Expenses claimed automatically via VAT100
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