📊 Typical Red Flags

1. Employer National Insurance (NI)

On £200/day PAYE, the agency pays ~£27.60/day in employer NI.

With umbrella, the agency avoids this cost.

2. Holiday Pay

£200/day PAYE requires ~£24/day holiday accrual by the agency.

With umbrella, the contractor sees this deducted.

3. Pension Contributions

– Auto-enrolment requires agencies to contribute at least 3% of qualifying earnings under PAYE. 

– Umbrella companies handle this, again deducting from the contractor’s gross rate.

4. Umbrella Fees

– Contractors also pay a **weekly fee** to the umbrella (typically £15–£30/week). 

– This is an additional cost not present under agency PAYE.

⚖️ Net Impact

– Agency savings: Roughly 20% of payroll costs (NI + holiday + pension + admin). 

– Contractor impact: Take-home pay under umbrella is often 5–10% lower than PAYE for the same “headline rate,” once deductions and fees are factored in. 

– Transparency issue: Agencies advertise a higher “umbrella rate” to offset these deductions, but contractors often find their net pay is less than expected.