Umbrella Company News: 56.5% of Freelancers Don’t Understand Payslips

Posted on in Umbrella Company.

Paraplus, an umbrella company located in Knutsford, recently conducted a survey among 2,000 UK freelancers, which yielded the startling result that 56.5% didn’t fully understand their payslips.  Nationally, this could equate to around 900,000 freelancers who don’t understand what their being paid and why. 

The potential risk of this is that HMRC may eventually levy them with fines, or the freelancer could be getting paid incorrectly.  HMRC views it as the contractor’s responsibility to know what they should be getting paid. 

Of the various industries in which the freelancers worked, IT freelancers had the least understanding of their payment:  62% admitted they didn’t understand theirs.  Among the common reasons given for not understanding their payslip were:

  • I don’t need to/it isn’t my responsibility
  • I don’t understand tax legislation/codes

The results are somewhat perplexing, as 37% of those surveyed admitted they had already been fined by HMRC, whilst 55% said they don’t understand HMRC’s guidelines.  The full story can be found at the Paraplus blog

Contractors:  Take Action

Contractors already have much to know.  They have to find clients, keep their skills sharp, manage their taxes, ensure good working relationships with clients, and ensure clients pay in a timely manner.  Scrutinizing invoices is just another task to add to an already large volume of work.

Following is a simple process for ensuring the accuracy of a payslip:

  • Gross invoice:  This should reflect the entire payment for the project.
  • Gross salary:  This number should equal the gross invoice, with all expenses subtracted.  This is the part of the contractor’s payment that gets taxed. 
  • Net salary:  This is the income leftover after income tax and National Insurance are subtracted.

If It’s Too Much Work, Use the Services of a Reputable Umbrella Company

Whilst contractors love their independence, they don’t have to do everything on their own.  Umbrella companies can take care of all payroll functions so contractors can focus on doing what they love most – providing a valuable service to their clients.  Contractors can then contact these companies and ask any questions they might have so they know they will never receive a penalty from HMRC.


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