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Umbrella Company V Agency PAYE – what’s right for you?

decide So you’ve landed that great contract. Now to work out which payroll option is going to put more money in your pocket. As a temporary worker there is a number of ways you can choose to get paid. If the hassle of running your own business isn’t for you then you can either be paid directly on your recruitment agency’s payroll, or you can consider working through a compliant Umbrella company like Liquid Friday. On paper the options are pretty similar. In both cases you become an employee of the organisation, all your payroll and administration is taken care of and you are taxed under PAYE. Both are low risk - IR35 does not apply and all tax and NI is deducted so you don’t have to worry about putting money aside for tax bills. Here we look at the pros and cons of Umbrella Company V Agency PAYE to help you make an informed decision:

Umbrella Company


  • Uplifted rate - being employed by an Umbrella company usually means that your agency will offer a higher hourly rate because they don’t have to cover the costs of employing you
  • Quick and easy to set up - just submit your timesheets and expenses
  • Continuity of employment - umbrella companies are geared towards contractors who work on a series of fixed-term assignments, so you keep the same employer as you move from job to job
  • Quality Umbrella companies will offer employee benefits (such as Perkbox)
  • Ability to claim work-related expenses (Temporary workplace expenses are subject to SDC tests)
  • You will usually be covered by the Umbrella company’s insurances (with Liquid Friday Public Liability, Professional Indemnity, Employers Liability and Personal Accident cover is all included as standard)


  • If you are not incurring much in the way of work-related expenses or gaining employee benefits, an Umbrella company may not be the best option
  • All Umbrella companies will retain a margin from the money received from your agency
  • There are some unscrupulous Umbrella companies who may not be paying all the taxes due to HMRC. The easiest way to check you are safe is to use an FCSA registered Umbrella company.

Agency PAYE


  • Very easy - it is the simplest of payroll models, you just need to sign your contract and submit your timesheets
  • You deal directly with your recruitment consultant on all issues, with no third party involved


  • You are not able to claim expenses
  • The hourly rate is likely to be lower than if you are employed by an Umbrella company
  • May not be right for you if you change assignments frequently or don’t want to be tied to one agency

So what’s best for you?

We take pride in working in the interests of contractors. When you contact Liquid Friday we will give you an unbiased take home pay calculation compared with agency PAYE. Or use our handy tool to see what option will work for you.   If you need specific information about IR35, go to the IR35 Helpline website at