Umbrella Payroll Glossary

The Assignment Rate is the hourly rate agreed upon between the contractor and the client for the services provided. It is the gross amount before any deductions.

A Contract of Services is a legal agreement outlining the terms and conditions of a contractor’s services, including payment terms and project details.

Gross Pay is the total amount of money earned by an employee or contractor before any deductions, such as taxes and National Insurance Contributions (NICs).

Holiday Pay is compensation paid to employees or contractors for the time they take off work for holidays. Under The Working Time Regulations 1998, workers are entitled to a minimum amount of paid holiday.

IR35 is a set of tax regulations in the UK that determines whether a contractor is considered an employee for tax purposes. It can affect how income is taxed for contractors operating through intermediaries and third-party agencies.

Mileage Allowance is reimbursement provided to employees or contractors for the cost of using their own vehicles for work-related travel.

Net Pay is the amount of money an employee or contractor receives after all deductions, including taxes and National Insurance, have been made from the gross pay.

National Insurance Contributions (NICs) are payments made by employees and employers to fund state benefits, such as the National Health Service (NHS) and the State Pension in the UK.

A P45 is a form provided by employers when an employee leaves a job. It includes details of earnings and tax paid during the employment, and is used to ensure correct tax deduction in any subsequent employment.

A P60 is a summary of an employee’s total earnings and deductions for a specific tax year. It is usually provided annually by employers at the end of the tax year.

Pay As You Earn (PAYE) is the system used by employers to deduct income tax and National Insurance contributions from employees’ salaries before paying them. This ensures that tax is collected at the source.

Pension Auto-Enrolment is a legal requirement in the UK for employers to automatically enrol eligible employees into a workplace pension scheme. Both employers and employees contribute to the pension.

Pension Contributions are regular payments made by employees and employers into a pension scheme to fund retirement benefits. These contributions can be deducted from gross pay, before tax.

Self-Assessment is a system in the UK where individuals report their own income and pay taxes directly to HM Revenue & Customs (HMRC). It is used mainly by those with income outside, or in addition to, PAYE employment.

SSP (Statutory Sick Pay) is a payment made by employers to employees who are unable to work due to illness, following certain eligibility criteria, such as earning above a certain threshold or being sick for at least four consecutive days.

An Umbrella Company is an organisation that acts as an employer for contractors and freelancers. It handles payroll processing, tax deductions, and other administrative tasks on behalf of the contractors.

The Weeks in Assignment refers to the number of weeks a contractor has been working on a specific assignment. This term is often used to track the duration of a project or engagement.