Reading Your Umbrella Company KID Line by Line

Read it bottom-up, not top-down

Almost everyone reads a Key Information Document the way they read anything else: start at the top, see the day rate, feel reassured, skim the rest. That is precisely backwards, and it is why so many supply teachers are surprised by their first payslip despite having been sent a perfectly accurate document.

The figure at the top of an umbrella KID is not your pay. It is the total cost of employing you, expressed per day. Every line below it is something that has to be funded out of that total before your gross pay exists. So the number you should look at first is the one at the bottom — the stated net remuneration for a single pay period — and then work upwards asking, for each line, what is this and is it legitimate.

The good news, and this genuinely is good news, is that most of the gap between the headline rate and your bank account is made up of real statutory employment costs that would exist under any employer. The bad news is that a minority of the gap is not, and the only way to tell them apart is to know what each line should look like. That is what the rest of this page does.

The worked example: £180 a day, five days, paid weekly

Our illustrative supply teacher is engaged through an agency, paid by an umbrella company on a weekly cycle, and worked five days in the week in question at an assignment rate of £180 a day. The umbrella charges a flat margin of £20 a week. Holiday pay is rolled up at 12.07%. She is on tax code 1257L, is auto-enrolled in the workplace pension at the statutory minimum, and has a Plan 2 student loan.

Now take each line in turn. The arithmetic is shown so that you can substitute your own rate, margin and working pattern.

Line 1: the assignment rate — and the rate you never see

The assignment rate is what the agency pays the umbrella company for each day you work. It is the entire pool of money available for your employment, and it is the figure a consultant almost always means when they say “we can do £180 a day.”

It is not, however, what the school pays. The school is billed the charge rate, which is the assignment rate plus the agency’s own fee or margin. You will very rarely be told the charge rate, and there is no obligation on the agency to disclose it to you — regulation 13A requires the KID to explain the difference between the rate the employment business is paid for the placement and what you actually receive, but in practice most documents satisfy that by explaining the umbrella layer rather than by publishing the agency’s own margin.

The distinction is worth holding onto for one reason: when a school says it is paying £250 a day for cover and you are seeing £114, three separate layers sit between those numbers, and only two of them are on your KID. The agency’s fee is the invisible one.

Line 2: the umbrella company margin

The margin is the umbrella’s fee for being your employer: running PAYE, issuing a contract of employment, administering holiday pay accrual, handling pension auto-enrolment, and dealing with HMRC. It is the umbrella’s only legitimate income from you, and in a compliant model it is a flat amount per pay period — in our example, £20 a week.

Flat is the important word. The umbrella’s cost of processing your payroll is essentially the same whether your day rate is £130 or £230, so a fee that scales with your rate is charging you for value it is not adding. A percentage margin is the most common structural red flag in this market.

There is no statutory cap on the margin. Nothing in the Conduct Regulations limits what an umbrella may charge; the protection you have is disclosure, which is exactly why the KID matters. The practical consequence is that comparing two umbrellas on a panel is a real exercise with real money in it, and you can only do it if you have the key facts page for each — which, where an agency offers more than one payment route, gov.uk expects it to provide.

One counter-intuitive point that is worth knowing before you get angry about a margin: because the margin comes out before tax and National Insurance, a £20 margin does not cost you £20 of take-home. Removing it would add £20 to the pot, which after employer NI and the levy becomes about £17.32 of extra gross pay, which after 8% employee NI, 20% tax, 5% pension and 9% student loan leaves roughly £10 of extra net pay. The margin is real money and you should still shop for a lower one, but its true cost to you is a little over half its face value.

Line 3: employer’s National Insurance

This is the largest single line in the waterfall and the one that generates the most anger, usually because nobody explained it before the first payslip.

The umbrella company is your legal employer. That is not a technicality invented to move money around; it is why you have a contract of employment, statutory sick pay, pension auto-enrolment and employment rights at all. But being an employer carries employer costs, and the principal one is secondary Class 1 National Insurance. In 2026/27 that is charged at 15% on earnings above the secondary threshold of £5,000 a year — £96 a week — following the increase from 13.8% and the cut in the threshold from £9,100 announced at the Autumn Budget 2024. Umbrella companies are not eligible for the Employment Allowance, so there is no relief against it.

Because the umbrella has no revenue other than the assignment rate, the cost is funded from that rate. The arithmetic runs backwards from the money available. After the margin, £880 remains, and that £880 has to cover the gross pay plus 15% employer NI on it above £96 plus 0.5% levy on it. Solving that gives gross pay of £774.37, employer NI of 15% of (£774.37 − £96) = £101.76, and the levy below. Add those three together and you get back to exactly £880.

Line 4: the Apprenticeship Levy

The Apprenticeship Levy is charged at 0.5% of an employer’s annual pay bill, and is payable by employers whose pay bill exceeds £3 million a year. Umbrella companies process the pay of thousands of workers and are comfortably over that threshold, so the levy applies to them and, like employer National Insurance, is funded out of the assignment rate.

In our example it is 0.5% of £774.37 = £3.87. It is the smallest line in the waterfall and almost never the thing worth arguing about, but it should be there and it should be separately identified rather than bundled into a vague “employment costs” line. Its presence is actually a mild good sign: a KID that itemises the levy is a KID produced by a payroll system that is thinking about compliance.

One honest caveat. Levy-paying employers receive a £15,000 annual levy allowance, and how an umbrella apportions that allowance across tens of thousands of workers is an internal accounting matter that no worker-facing document explains. What appears on your KID is a straightforward 0.5% pass-through. Whether the umbrella’s aggregate levy bill exactly equals the sum of its pass-throughs is not something you can verify from your own paperwork, and it is not worth your time to try.

Line 5: holiday pay — inside the rate, never on top of it

This is the line that causes more disputes than the rest of the document combined, and the misunderstanding is always the same one: people expect holiday pay to be additional money. It is not. Holiday pay comes out of the same assignment rate as everything else. The agency does not send extra funds to cover it.

There are two lawful treatments, and your KID must say which one applies to you.

Rolled up and paid with each payment

Rolled-up holiday pay was held unlawful by the European Court of Justice in Robinson-Steele v RD Retail Services (C-131/04, 2006), on the reasoning that paying holiday pay in advance discourages workers from actually taking rest. UK law reversed that position through the Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 (SI 2023/1426), which applies to leave years beginning on or after 1 April 2024 — but only in a narrow lane, and only for irregular hours workers and part-year workers. Day-to-day supply teaching is close to the paradigm case of irregular hours work; a long-term booking on a fixed timetable may well not be.

Where it is lawful, three conditions must all be met: it must accrue at at least 12.07% of your total pay for work done in that pay period; it must be paid at the same time as the pay for that work; and it must be shown as a separate, clearly itemised payment on the payslip.

In our example, the gross taxable pay of £774.37 divides into basic pay of £690.97 and rolled-up holiday pay of £83.40. The arithmetic is £690.97 × 12.07% = £83.40, and the two add back to £774.37. If you want to work backwards from a gross figure instead, divide by 1.1207.

Accrued and held back

The alternative is that the umbrella retains the holiday element and pays it when you take leave, or when you request it. This is lawful, and for a teacher who wants a lump sum at Christmas or in August it can be genuinely preferable. But it creates a pot of your money held by somebody else, and a pot that is never paid out is the classic withholding problem in this sector — covered in full in is your umbrella company withholding your holiday pay. If your KID says holiday pay is accrued and retained, that document is itself the evidence that the pot exists. Keep it.

For the full picture of which category you fall into, why 12.07% is 5.6 divided by 46.4 rather than 5.6 divided by 52, and what happens if your booking is too regular for rolled-up pay to be lawful at all, see rolled-up holiday pay for supply teachers.

Line 6: gross taxable pay — the figure that actually matters

£774.37. This is the number your payslip will call gross pay, and it is the only figure on the whole document that behaves like an ordinary employee’s wage. Everything above it was employment cost; everything below it is ordinary PAYE.

Two practical points follow. First, when you compare an umbrella arrangement against a school’s direct pay, this is the figure to compare, not the assignment rate. A £180 assignment-rate day and a school paying £180 a day directly are completely different propositions, because the school funds employer NI out of its own budget rather than out of your rate. That comparison is worked through in supply teacher pay explained.

Second, this is the figure to type into a take-home pay calculator. Everything from here down is standard, and there is no reason to do it by hand.

Line 7: your own deductions, down to net

From £774.37 of gross taxable pay, four things come off, all of which would come off identically if you were employed by a school, a supermarket or a hospital:

• Employee National Insurance — 8% on weekly earnings above the primary threshold of £242, and 2% above the upper earnings limit. Here: (£774.37 − £242) × 8% = £42.59.
• Income tax under PAYE — at tax code 1257L the weekly free pay is £12,570 ÷ 52 = £241.73, so (£774.37 − £241.73) × 20% = £106.53. Note this is your tax code doing the work, not the umbrella: a wrong code is the most common cause of a first payslip looking far worse than the KID predicted, and it is fixed with HMRC rather than with the umbrella.
• Pension auto-enrolment — the statutory minimum employee contribution is 5% of qualifying earnings, the band running from £6,240 to £50,270 a year, which weekly is £120 to about £967. Here: (£774.37 − £120) × 5% = £32.72. This is a defined-contribution workplace pension, not the Teachers’ Pension Scheme — umbrella companies are not accepted TPS employers.
• Student loan — on Plan 2 the 2026/27 threshold is £29,385 a year, which is £565.10 a week, with 9% charged above it. Here: (£774.37 − £565.10) × 9% = £18.83. In real payroll, student loan deductions are rounded down to a whole pound, so you would see £18.

£774.37 less those four leaves £573.70 — about £114.74 for each of the five days worked, or roughly 64% of the £900 assignment rate.

Rather than reproduce the tax and National Insurance bands in prose for every combination of tax code, student loan plan and pension status, use the teacher take-home pay calculator: enter the gross taxable pay figure from line 6, annualised if necessary, and it will handle the rest. The value of this page is the four lines above gross pay, which no ordinary take-home calculator knows about.

The same sums at £130 a day

Fixed costs behave differently at different rates, and the quickest way to see it is to run the identical calculation at a lower day rate. Same umbrella, same £20 weekly margin, same five days, same tax code, same pension, same student loan plan — only the rate changes.

Two things are visible here that a single example cannot show you.

The flat margin bites harder at a lower rate. £20 a week is 2.2% of a £900 assignment rate and 3.1% of a £650 one. Expressed in the currency that matters — take-home pay — the margin costs about £10.05 a week at £180 a day and about £11.60 at £130 a day, because at the lower rate the worker falls below the student loan threshold and therefore keeps a higher proportion of any extra gross pay. As a share of net pay that is 1.8% against 2.6%: shopping for a lower margin matters roughly half again as much to a teacher on a modest primary day rate as to one on a secondary shortage-subject rate.

But the overall retention rate moves the other way, and you should not misread it. The £180 day keeps 64% of the assignment rate; the £130 day keeps 69%. That is not evidence that the umbrella treats low earners better. It is simply that the Personal Allowance, the National Insurance primary threshold and the student loan threshold are fixed pound amounts, so they shelter a larger fraction of a smaller wage. Judge an arrangement on pounds in your account, never on the percentage retained.

Legitimate costs versus red flags

It matters enormously to separate the two, because a supply teacher who treats every deduction as a scam will waste their energy on employer National Insurance and miss the thing that will genuinely cost them.

Legitimate, even though it comes out of your rate

• Employer National Insurance at 15% above £5,000 a year. A real tax on a real employer, paid over to HMRC. It has to be funded from the assignment rate because the assignment rate is the only money in the arrangement.
• The Apprenticeship Levy at 0.5%. Likewise a genuine statutory employer cost for any employer with a pay bill above £3 million.
• A flat umbrella margin. The umbrella does real work — payroll, HMRC reporting, holiday administration, auto-enrolment — and is entitled to be paid for it.
• Holiday pay coming out of the same pot. It was never extra money. What matters is that you actually receive it, at 12.07% or more, itemised.
• Your own tax, National Insurance, pension and student loan. Identical to what any employee pays on the same gross.

Red flags — treat each of these as a reason to stop and ask

• A margin expressed as a percentage of your rate rather than a flat fee per pay period. The umbrella’s work does not scale with your day rate, so neither should its fee.
• An expenses or mileage scheme that reduces your taxable pay while you are working under the supervision, direction and control of a school. Travel between home and an assignment is not deductible in those circumstances, and a scheme that pretends otherwise creates a tax liability that lands on you.
• Holiday pay that never appears as a separate line on your payslip. Separate itemisation is one of the three statutory conditions for lawful rolled-up holiday pay. Its absence is not a formatting quirk; it is non-compliance on the face of the document.
• Pay split into a small taxed element plus a “bonus”, “advance”, “loan”, “grant” or “growth payment”. This is the signature of a disguised remuneration scheme. HMRC publishes a list of named tax avoidance schemes, and the liability falls on the worker, not the promoter. Stop and take union advice.
• Any deduction on your payslip that the Key Information Document never mentioned. The document is required to list costs, deductions and fees item by item, so an undisclosed deduction is a documentary discrepancy rather than a matter of opinion.
• A net figure on your payslip that is materially different from the KID, with no explanation. Reasonable estimation allows small differences; it does not allow structural ones.
• Reluctance to put the margin, the holiday pay treatment or an estimated net figure in writing before you agree terms. Compliant umbrellas generate these from their payroll system in minutes.

If the KID and your bank account disagree

Work through this in order. Each step creates a written record that the next step needs, which is why skipping to the end rarely works.

If you were never given one at all

If there is no Key Information Document to compare your payslip against, you are missing the most useful single piece of evidence in this whole area — but you are also, in a narrow sense, in a stronger position than you might think.

Failing to issue a compliant KID before obtaining your agreement to terms is a breach of regulation 13A of the Conduct of Employment Agencies and Employment Businesses Regulations 2003. It is the agency’s breach, not the umbrella’s, and the gov.uk guidance is explicit that the duty cannot be deferred to the umbrella company. Since 7 April 2026, it is reportable to the Fair Work Agency.

Be honest with yourself about what that is worth. The Conduct Regulations do not give you a free-standing compensation claim for the missing document. There is no award for not having been given one. What the breach does is two things: it supports an enforcement report, and it materially weakens any subsequent argument by the umbrella or the agency that you agreed to a deduction. If money is missing and no document was ever issued, the other side is asserting that you consented to a term that the law required to be put in front of you in writing and never was. That is a significantly better place to argue from than a dispute about what was said on the telephone.

Start, then, by asking for the document — in writing, to the agency, citing regulation 13A — even if you already know none exists. Either you get it, and you can run the reconciliation in step 1; or you get a reply that does not produce one, and you have documented the breach. Both outcomes are useful. The full detail of what you should have been given, and a checklist you can hold against whatever eventually arrives, is in Key Information Documents for supply teachers.

The short version

An umbrella Key Information Document is not trying to trick you, and most of what it shows is genuinely unavoidable. Employer National Insurance at 15%, the Apprenticeship Levy at 0.5% and a flat administrative margin are real costs that any employment arrangement has to fund from somewhere, and in an umbrella arrangement the only somewhere is the assignment rate. On the illustrative figures here, they account for the bulk of the gap between a £180 headline day rate and £114.74 of net pay a day.

What the document is for is letting you check the parts that are not unavoidable: the size and structure of the margin, whether holiday pay is being paid at 12.07% and itemised, and whether anything is being deducted that was never disclosed. Read it bottom-up, keep it, and compare it against your first three payslips line by line. If it does not match, work up the escalation ladder above — and remember that since April 2026 the agency has a direct financial reason to care about what its umbrella is doing.