Agency PAYE

What is the Agency PAYE option?

If you source a contract with the help of an Agency, some recruitment firms offer to pay you through their own payroll as an Agency PAYE worker.

Agencies will generally offer you a lower than the rate they’ll offer to an Umbrella Company or when you work through your own Limited Company. The reason is that aside from the administration costs of running a payroll, Agencies have to account for employers NICs, holiday pay and other statutory benefits, on top of what they pay you. They’ll often therefore pass on these cost savings in an uplifted rate if you work through a third party such as an Umbrella company or your own Limited Company.

There are few instances when travel and subsistence expenses claims will be allowable using the Agency PAYE option. This is because HMRC consider each assignment to be a permanent engagement. Ordinary commuting costs to a permanent place of work do not qualify for travel and subsistence claims.

Choosing the Agency’s PAYE option means you only deal with one organisation, and it is, therefore, a straightforward option.

Of all the ways of operating, the Agency PAYE option involves the least administration, but generally the lowest return on your income.

Is the Agency PAYE option right for me?

The Agency PAYE option is most suited to you if you:

  • only intend to contract for a very short period
  • don’t have travel or subsistence expenses
  • want low administration or don’t want to involve a third party
  • earn at a rate of pay (usually £10.00 per hour or less) that does not justify the margin of working through an Umbrella or the accountancy fees your own Limited Company
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