Why is my assignment rate different from my gross pay?
Your assignment rate is the amount your agency pays the umbrella company for your work. It funds your pay, employment costs and the umbrella company’s margin. Your gross pay is your salary before employee deductions. Your net pay is what reaches your bank account. [3]
That distinction can be easy to miss when you’re offered a new assignment. You hear an hourly or daily rate, work out what you expect to earn, then see a different figure on your payslip. Let’s make the numbers easier to follow.
Three figures worth knowing
| Figure | What it means |
| Assignment income | The assignment rate multiplied by the agreed hours or days worked, before employment costs and the umbrella margin are accounted for. |
| Gross pay | Your pay before deductions such as Income Tax and employee National Insurance. |
| Net pay | Your take-home pay after employee deductions. |
For example, an assignment rate of £25 an hour for 40 hours produces £1,000 of assignment income. That £1,000 is the starting point for the calculation. It is not a promise of £1,000 gross salary or take-home pay. [3]
Where the difference comes from
The assignment income needs to cover the umbrella company’s margin and employment costs. These can include employer National Insurance, employer pension contributions and the Apprenticeship Levy where applicable. The calculation also needs to show how holiday pay is treated.
Once your gross pay has been established, employee deductions are applied. Depending on your circumstances, these can include Income Tax, employee National Insurance, pension contributions and student loan repayments.
Employer National Insurance and employee National Insurance are separate. Employer National Insurance can be accounted for in the calculation from assignment income to gross pay. It should not then be deducted from your gross pay as though it were an employee contribution. [1]
Holiday pay deserves a proper explanation
Ask whether holiday pay is paid when you take leave or included with your regular pay under an eligible rolled-up arrangement. Rolled-up holiday pay is permitted for qualifying irregular-hours and part-year workers, and must be shown separately on the payslip.
If it is paid with your regular wages, you will not receive that holiday pay again when you take the time off. You still need to be able to take your holiday. That difference matters when you compare two take-home figures or plan time away from work. [2]
Ask for an illustration before you decide
A useful pay illustration should let you follow the calculation from the rate your agency has offered to your estimated take-home pay. Ask the provider to show the assumptions, including:
- Your assignment rate and expected hours or days.
- The umbrella margin and employment costs.
- The holiday pay arrangement.
- Your tax code, pension position and any student loan deductions.
When comparing providers, give each one the same information. A higher estimate can reflect a different assumption, so ask what explains the difference. HMRC also provides an umbrella pay estimation tool for a separate sense-check. [3]
Your agency’s Key Information Document is useful too. It explains the pay arrangement and includes an example. That example is not necessarily a personalised calculation for your actual assignment. [4]
Check the first payment against the paperwork
Keep your illustration, assignment details and first payslip together. Check the hours or days paid, the rate, the margin and any deductions. If you receive a reconciliation statement, use it to follow the calculation before gross pay. Your bank payment should also be explainable from the records.
If something does not add up, ask for a line-by-line explanation. Be particularly cautious about promises that part of your employment income can be paid as an untaxed loan, or that a provider is ‘HMRC approved’. HMRC does not approve umbrella companies. [5]
A clearer starting point with NWM
Before you choose an umbrella company, you should feel comfortable with how your pay will work. Ask NWM for a personalised pay illustration, with NWM’s margin and the assumptions clearly explained. If a figure needs explaining, we’ll help you work through it.
Request your Umbrella pay illustration
An illustration is an estimate. Actual pay depends on your circumstances, the work paid and the information used when payroll is processed.
Sources and further reading
1. HMRC — Working through an umbrella company
2. Acas — Rolled-up holiday pay
3. HMRC — Work out pay from an umbrella company