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A Teacher guide to agency pay who use umbrella companies!

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We get a lot of questions about PAYE and the deductions compared with agencies that use Umbrella companies.  To make it easier we have put together a fact sheet to explain. 

Each week when you receive your payslips at first glance you might think the agencies using umbrella companies are paying more than you may receive as PAYE. However next time look closely at your deductions and you will see you are financially better to go through an agency paying PAYE than using an agency using umbrella companies.

We will go into what exactly the deductions  and what they mean to you!  We know this might not the most exciting article you will ever read however it might be one of the most important!

Example 1- Supply Teacher on a Long-term Agency Contract in London

Agency teacher on a long-term contract through a big, national supply agency at a primary school on the London fringe. This teacher is paid via a well-known umbrella company that is used by many other agencies nationally.

Supply Teacher Pay on a Long-term Agency Contract in London

Supply Teacher Pay on a Long-term Agency Contract in London

Remember this is just a snapshot of deductions made before income tax, Employees’ NI,  and other statutory deductions:

There are three major concerns with this payslip:

  1. As we can see, there is a weekly charge of £9.75 levied by the umbrella company to process payroll. This is in fact at the low end —  many umbrella companies charge £20 per week or more, adding up to £80 deductions a month.
  2. The payslip clearly states that Employer’s National Insurance is deducted from the advertised rate and is wrapped into something called ‘Employer’s costs’. This is in addition to statutory deduction of Employees’ NI. Teachers should not be paying both Employer’s and Employees’ NI.
  3. Holiday pay is ‘accrued’. Essentially this means that holiday pay is kept by the umbrella and then must be actively claimed back by the teacher. Sadly the deadline by which it must be ‘claimed back’  sometimes passes before the teacher has done so — meaning the umbrella company will not pay out the holiday pay even though it has been earned by the teacher.

All in all, these non-statutory deductions mean that this teacher’s gross pay is a massive £104.31, or a full 14%, below their agreed weekly gross rate of pay.

Example 2 – Supply Teacher on a Long-term Agency Contract in Birmingham

Agency teacher on a long-term contract through a big Birmingham-based supply agency at a nearby primary school. This teacher is paid via a well-known umbrella company that is different to the one in the first example, but that is also used by many agencies nationally.

Supply Teacher Pay on a Long-term Agency Contract in Birmingham

Supply Teacher Pay on a Long-term Agency Contract in Birmingham

Here, the teacher is missing out on £115.98 or 20% of their agreed weekly gross rate of pay.

If you work for Class Education you have the advantage of being paid PAYE which means:

  • There are no umbrella company fees
  • Employer’s NI contribution is never deducted from the advertised rate — it is paid by the school and costs are calculated and clearly broken down to the school before a booking can be made
  • Holiday pay is paid straight away, meaning there is no need to remember to claim it back at a later date

Below is an example of how Class Education payslip looks.  Please do not be fouled by agencies that promised to pay you as higher amount.  The end result ; your take home is significantly less.  This agency was set up to help teachers and not complicate their already busy lives.  We pride ourselves on how we look after our staff.

If you have any questions on how you are paid and the deductions, please do not hesitate to give us a call on 01462 659913 or info@class-education.co.uk

Reference: Teacher Booker

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