What details SHOULD a contractor payslip include to be compliant?

In today’s umbrella company market – and that’s still an unregulated market, it’s crucial that as a contractor you understand what details should be on your payslip, writes John Bounds, a director at Rocket Paye.

If you don’t know what information is legally required on your payday document, you risk not knowing if you’re being paid correctly each week and not knowing if you’re being paid through a compliant umbrella company.  

Contractors should not have to be payroll experts, however, so here are seven key things that we advise you look for on your umbrella payslip, to be certain you are getting paid what you is legally yours.

1. Employer’s name

This is probably where the biggest red flag of them all crops up!

Let’s explain. On your payslip, by law your employer’s name must be shown exactly as it is registered with Companies House.

You should check that the company name on the payslip is the same company name (letter-for-letter) that was mentioned in the contract you agreed to. Those two names should also match (identically) the name of the company which you can telephone and speak to if you have any queries about your weekly payments or your employment through them more generally. If there is any difference or disparity between these three sets of company names, you are likely being paid through a tax avoidance scheme.

2. Employer’s PAYE reference number

Similar to the employer’s name (i.e. the name of the umbrella company which is employing you), the employer’s / umbrella’s PAYE tax reference number must be displayed somewhere on your payslip.

To be certain that any tax and National Insurance that’s being deducted on your payslip is being paid to HMRC, you can telephone HMRC and check your tax affairs by quoting this PAYE tax reference number.

This will give you a good indication as to whether your tax is being paid. If you don’t feel that the amounts that have been paid are correct, or they are too low, you can report the employer to HMRC, there and then.

3. Holiday pay

We all know about the immoral past the umbrella company market has with holiday pay!

From withholding holiday pay to simply not offering holiday pay at all, these problems still exist today. So, one of the biggest things to look out for on your payslip is holiday pay.

As a PAYE umbrella contractor, you are classed as an employee, meaning you qualify for all statutory rights. And holiday pay is of course a statutory right that you should receive from day one of your first assignment. Regardless of how you opt to receive holiday pay, it should be stated on your payslip.

4. Pension

While you may ultimately wish to opt-out of a pension and will probably not begin contributing to a pension for the first three months of your assignment, as a PAYE umbrella contractor, you will still be auto-enrolled.

Pretty soon after you begin working on assignment, you will receive a letter from the pension provider which the umbrella company uses, to let you know you have been enrolled and that you will either begin to contribute to your pot now, or that you have been deferred for three months.

If you do not receive any correspondence in the first month of employment, we would suggest you question why.

5. Minimum wage

Every employee in the UK- umbrella company employees included - should be paid at least minimum wage to remain compliant with the National Minimum Wage Act 1998.

On your umbrella payslip, best-practice would be to split out your salary into two parts.

The first part would be the amount of hours you have worked multiplied by minimum wage -- to show you are as a minimum being paid minimum wage.

The second part would be an additional taxable wage or something similar, which would make up the rest of your pay/day rate. If you have only one payment showing on your payslip (as opposed to two elements), absolutely calculate the gross figure by the hours you have worked to make sure the payment method complies with National Minimum Wage.

6. Itemised Employer Costs

A large part of your payslip will be the ‘Employer’s Costs’ section.

Be very careful with how these are displayed as this is the part of the payslip where bad umbrella companies indulge in ‘skimming’ or inserting hidden costs. The employer's costs should be itemised, line-by-line, so you can transparently see what costs are included and how much is accounted for each cost.

If you simply have one line on your payslip that reads something like “Employer's Costs” and a total figure, you have every right to question what’s included and ask for a breakdown of them.

7. Accreditation

While not necessarily a legal requirement of a payslip itself, an accreditation which is in good standing is a good starting point that your payslip shouldn’t be full of holes!

Simply ask yourself – does your umbrella have any accreditations, and are those accreditations recognised, and well-known or established? Two ‘Yes’ answers here bode well.

In fact, arguably the quickest way for first-timer contractors to gauge if they are being paid by a compliant payroll company is to check for such accreditations.

If your umbrella does display a logo, certificate, graphic or text denoting accreditation, it typically means they have been through some form of stringent audit, where any non-compliance would have hopefully been found out. Accreditations we recommend you look out for include SafeRec and Professional Passport, although there are others which are worth having too. But if you’ve got doubts about this effective ‘stamp of approval’ you can actually visit the accrediting body’s website to check that the umbrella company is displayed and has been through their vetting or audit process, as the umbrella claims.

Final thought…

Given that the repercussions are potentially very serious if you don’t see these seven fundamentals on your umbrella company payslip, please share and share again this article because we feel it could be very useful to very many – not to mention very helpful for potentially saving them a heap of time, toil and trouble with HMRC, and others.

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Written by John Bounds

John Bounds is a Director at Rocket PAYE and is a well-known figure within the payroll and recruitment sectors. He has worked in the temporary and contractor payroll market for 25 years specialising in legal and compliance.

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