Where the money comes from, what comes out of it, and why your take-home is not simply your day rate multiplied by days worked.
Most contractors coming to an umbrella for the first time are surprised by one thing: employer's National Insurance. It is a real cost, it is 15% of your salary above the threshold, and it comes out of the assignment value before you are paid.
You work the days and submit a timesheet. Your agency invoices the end client for your time at the agreed rate. That gross figure — your day rate multiplied by your days — is the assignment value. Everything else is calculated from it.
We raise an invoice on your agency for the work you have done, allocate the payment when it arrives, and chase it if it is late. Credit control is included — chasing overdue agency payments is one of the least enjoyable parts of contracting, and it is not yours to do.
Because the umbrella is your employer, it owes employer's National Insurance on your salary at 15% above the secondary threshold. Umbrella employers also exceed the £3m pay bill threshold for the Apprenticeship Levy, so 0.5% applies. Both are funded from the assignment value.
Our margin comes out next. It should be stated plainly and all-inclusive — no separate charge for insurance, payslips or admin.
What remains is your salary. Income tax and employee's National Insurance are deducted through PAYE, and the net figure reaches your bank account with a payslip showing every line. Holiday pay accrues at 12.07% and is paid when you take leave.
| Stage | What happens |
|---|---|
| Assignment value | Day rate × days worked — what the agency bills the client |
| Less employer's NI | 15% above the secondary threshold, funded from the assignment value |
| Less Apprenticeship Levy | 0.5% of the pay bill |
| Less umbrella fee | Our margin, agreed up front and all-inclusive |
| Gross salary | Your pay before employee deductions |
| Less income tax | Deducted through PAYE at your marginal rate |
| Less employee's NI | 8% between the primary threshold and upper earnings limit, 2% above |
| Take-home | What reaches your bank account |
Once employer's National Insurance is accounted for, a 90% retention rate is not achievable on a compliant basis. Providers advertising those numbers are typically relying on a scheme HMRC will challenge, and the bill lands on the contractor years later. Our calculator shows you the arithmetic honestly.
Enter your day rate in the take-home calculator and every line of the chain above is shown for your contract.
Run your day rate through the calculator, then talk to us about the exact figure and our fee.