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Umbrella Company vs PAYE

What's the difference?

Understanding the difference between an umbrella company, such as PayStream's My Max, and an agency payroll (PAYE) can be difficult so we thought we would explain the key differences to you. For example, do you know which one supports contributions into your personal pension through a salary sacrifice arrangement saving you £100’s in not only PAYE but also in National Insurance each month?

Why choose to work through an umbrella company? 

Our Lead Accountant, Vicky, explains what benefits you can enjoy by choosing to work through an umbrella company in under a minute.

Umbrella Company

PayStream's My Max umbrella service

Agency Payroll

Pay As You Earn (PAYE)

Ability to claim tax relief on allowable business expenses as they are incurred
Continuous employment across all your contracts if working with multiple agencies
Ability to supports contributions into your personal pension through a salary sacrifice arrangement
One pension pot across all of your contracts if working on multiple agencies
Employed under a contract of employment
Access to statutory sick pay
Access to statutory maternity or paternity pay
Access to statutory adoption pay
Access to comprehensive insurance package of employers liability, public liability and professional indemnity
Access to employee rewards scheme
One workplace pension pot across all of your contracts if working on multiple agencies
Access to statutory bereavement leave
Access to statutory shared parental leave
Access to Online GP service at discounted price
Access to Personal Accident cover at discounted price

Umbrella company

The simplest way to describe an umbrella company is that you become an employee of the umbrella company. This means that the agency will pay the umbrella company, who then after deducting all of the necessary PAYE and NI contributions pay the contractor their salary. Take a look below to see the key features of an umbrella company:


Pay As You Earn (PAYE) is when the agency is the contractor's employer and is responsible for paying them. The agency must deduct employed levels of tax and NI contributions are calculated and paid before the contractor receives their salary. Take a look below for some of the key features of PAYE:

  • One of the differences, as mentioned above is that the umbrella company will make the necessary deductions and also calculate any tax relief on allowable expenses, where the contractor isn't subject to supervision, direction or control, this can result in an increase in take home pay.
  • Very little admin to do and the contractor simply submits their timesheets and logs expenses online.
  • The contractor will enjoy a continuous employment record which is handy for mortgage and loan applications. 
  • Access to statutory benefits and inclusive insurances, this means the contractor can do what they do best knowing they are covered. 
  • A good umbrella company, like My Max, will give contractors access to a free employee rewards scheme and other benefits like in-house financial advisors.
  • The agency is the contractors employer and therefore is responsible for paying the contractor.
  • Employed levels of tax and NI is calculated and paid.
  • The contractor submits their timesheets to the agency.
  • The contractor has access to certain statutory benefits, like statutory sick pay.
  • Tax relief on any expenses is not available.

Try our new umbrella take home pay calculator

We'll give you a quick estimate of how much you can expect to take home on a weekly or monthly basis. Or for more information contact our New Business Team on 0161 923 0201 (option 1).

Calculate your take home pay

Are all umbrellas the same?

There are lots of umbrella companies out there, all promising different levels of take home pay and different levels of service, so who do you believe and who do you choose? Here are some tips and general advice for how to spot the heroes from the villains.

Are all umbrellas the same?

Get your free umbrella company quote.

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