Understanding Umbrella Payslip – How To Check If I Am Being Paid Correctly

15 May, 2020

The government of the United Kingdom has established various rules and regulations, over the payment, taxation, of an employee. The provisions have further been modified by HMRC and are implemented over the Umbrella companies. This, in turn, influences, an individual's salary, and reflects on his payslip. 

Other than going through the contract papers, it is necessary to know about your payslip minutely. The total amount, tax deductions, rate of deductions, etc. are a few of the aspects, an individual should be acquainted with, within his or her payslip.

Different Taxes 

Before knowing the nitty-gritty details of a payslip, it is necessary to know about the different taxes an employee is subjected to face. The various taxes applied on a payslip are as follows - 

Understanding Umbrella Payslip

1. Employee National Insurance

The legislation of the United Kingdom subjects every employee to pay their National Insurance. This payment is considered as a contribution of an individual's earning to his country. This insurance is depicted on an employees' payslip as EEs National Insurance. 

2. Employers National Insurance

Not only the employees, but the employers of a company are also subjected to this similar payment to the HMRC or Her Majesty's Revenue and Customs. This payment is also considered as an employer's contribution to his country, and it is also reflected over his payslip as ERs National Insurance. Further, an employer, with a minimum income of £162 per week, is required to pay approximately 13% over his earnings.


3. Tax

Being an employee of any of the Umbrella companies, such as the DNS Umbrella, you are subjected to pay two kinds of taxes to the HMRC.

Firstly, you are subjected to pay the tax based on your income. As your salary is provided through PAYE or Pay As You Earn, the tax deduction will be based on the PAYE code provided at the bottom (left-hand side) of the payslip. Further, if you think that the code is wrong, you can contact Her Majesty's Revenue and Customs, and they will provide you with a revised code.

Secondly, the tax will be deducted is the "Employment Tax". The rule of employment tax surfaced on April 2017, and your intermediary organisation would deduct either £25.00/ week or £95.00/month.

4. Apprenticeship Levy

Another deduction that an employer may find in his payslip is the Apprenticeship Levy. This system was first introduced in 2015 and has been active since 2017. To fund their new Apprenticeship, an employer is subjected to such levy. 

Further, this payment is imposed over the employers, with an annual income of £3m and above, and the total rate of payment is 0.5% from the organization's complete payslips. In addition, it should be mentioned that this payment is made excluding £15000 of the fixed annual allowance. 

Showing hours on a Payslip is mandatory since April-2019

After the government of the United Kingdom made few changes over reimbursement and taxpaying over every employee of the country, gradually a few other rules were also implemented. Such changes are reflected in a worker's payslip. 

Showing working hours of an employee's payslip is only mandatory for the workers' whose salary depends on the total hours he has worked. On 2019 onwards this system is being practised by various employers to make the payment procedure and the deductions more transparent. 

Further, it should be added that am employees working hours are not the same with the NMW or the National Minimum Wage. However, the employees who are paid depending on the hours they've worked should maintain the timeframe of NMW.

Check reconciliation statements

In simple words, a reconciliation statement is a complete breakdown of how an employee's salary has been calculated. A reconciliation statement includes various fields, such as the pension contribution a worker is making, your designated Umbrella company's margin, Employee National Insurance, Employer's National Insurance, Apprenticeship levy.

It has been stated before, that not only the contract paper should be checked thoroughly, to understand the terms and conditions; however, it is also necessary to understand the reconciliation statement. This, in turn, would help you at which rate the deductions are made. 

The benefits of creating an online personal account with HMRC

To replace the previously used manual tax return system, the Her Majesty's Revenue and Customs or HMRC introduced its official site. The online tax return system has been active since 2015, and on the same year, around 3.5 million people, including business owners, created their accounts. There are certain benefits that an individual may avail by opening a personal account with HMRC. The benefits are as follows

  • Easier tax payments, and simpler management
  • Efficient customer service
  • More straightforward process to claim child benefits

It is safe to say that the influence of HMRC over companies like Umbrella has been proven beneficial. The imposed rules have made payments more transparent and paying taxes easier. 

How does a personal account helps you

You can open a personal account with HMRC to verify the credibility of the payslip provided to you by your Umbrella company. Such accounts would also help you to evaluate if your opted organisation is paying the right amount as shown on your payslip.When you open a personal account , then you are privileged to get certain benefits. Some of them can be listed as follows

  • You will be able to check the tax code and tax estimate
  • Check your tax return and tax credits
  • Manage your state pension and marriage allowance
  • Make the HMRC Know about your change in address
  • Easily find out your national insurance number