Umbrella vs PAYE
Umbrella company vs agency PAYE: which pays more?
Side-by-side comparison with real numbers. See exactly how umbrella margins, employer NI, and pension contributions affect your take-home — and which option wins for your situation.
You've been offered a contract at £20/hour. The agency asks: PAYE or umbrella? Here's what changes, with real numbers.
The short answer
Agency PAYE almost always beats umbrella for take-home. Umbrella exists because of IR35 rules, not because it's better for you.
How umbrella actually works
Under umbrella, you become an employee of the umbrella company — not the end client. The agency pays the umbrella your assignment rate (higher than the PAYE rate). Then the umbrella deducts:
- Their own margin (usually £15–£25 per week — this is theirs to keep)
- Employer's National Insurance @ 15% (from April 2026)
- Apprenticeship Levy 0.5% if the umbrella's wage bill is £3m+ (most are)
- Employer pension contributions if enrolled
- Then normal PAYE + employee NI on what's left
Side-by-side at £20/hour, 40 hours/week
| Agency PAYE | Umbrella | |
|---|---|---|
| Hourly rate quoted | £20.00 | £23.00 (uplifted) |
| Weekly gross before uplift | £800 | £920 |
| Umbrella margin | — | −£20/wk |
| Employer NI (15%) | — | −£82.50/wk |
| Apprenticeship Levy | — | −£3.50/wk |
| Your gross | £800 | £814 |
| Estimated net after PAYE + NI | ≈ £642 | ≈ £652 |
The umbrella's uplifted rate looks better on paper but the employer costs eat almost all of it. A well-set uplift roughly matches PAYE take-home. A poorly-set uplift is worse.
When umbrella might be worth it
- The end client won't deal with an agency PAYE contract — no choice.
- You want to claim genuine business expenses (rare now, since HMRC restrictions from 2016).
- You're running multiple contracts and need employment continuity between them.
Clok tracks both umbrella and PAYE assignments side by side, so you can compare real net earnings after tax for every contract you take.
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