You’re seeing two types of National Insurance on your payslip and wondering why so much is being taken. One looks like it’s from your pay, the other before it even reaches you. It feels like you’re being charged twice, but you’re not. If you’re working through an umbrella company, this is exactly how the system works. Let’s break it down so you know where every pound is going and what you can do to make sense of it.
What is National Insurance and how does it work under an umbrella company?
National Insurance is a government deduction taken through PAYE. With umbrella payroll, you cover both employee and employer NI because the umbrella company is your legal employer.
When you work inside IR35 or through a recruitment agency, you can’t go self-employed. You need to be paid like an employee. So the umbrella company steps in and becomes your employer on paper. They take the contract rate from the agency, handle your payroll, pay HMRC, and send you what’s left.
That contract rate is called your assignment rate. It’s not your salary. It’s a bundle that includes everything: your gross pay, employer NI, apprenticeship levy, umbrella margin, holiday pay, and pension if applicable. Once all those slices are taken out, the rest becomes your gross salary. From that gross salary, your normal employee deductions are taken. What you’re left with is your take-home.
It looks like a lot is going missing. That’s because you’re seeing deductions both before and after gross pay. But both sides are legal, and they’re the same across every umbrella company.
Why are you paying both types of National Insurance?
You’re not being taxed twice. You’re paying employee NI from your salary, and the employer NI is paid using part of your assignment rate, not from your wages.
The confusion usually starts here. The umbrella company doesn’t keep the employer NI. They send it to HMRC on your behalf. But they don’t cover that cost out of their own margin either. They take it from your assignment rate.
This means your rate has to stretch further. It’s not just paying your salary. It’s covering employer NI, the umbrella’s weekly fee, and other costs tied to employment.
Let’s say your daily rate is £500. That’s £2,500 per week. That’s what the umbrella receives from the agency. They don’t just turn around and pay that to you. They take out the £20 weekly margin, plus statutory employer deductions like 13.8% NI and 0.5% apprenticeship levy, which they legally owe on your earnings.
Here’s how it looks step-by-step.
How National Insurance affects your take-home pay
National Insurance cuts into your take-home in two places—before your gross salary appears, and again after, as your own employee NI.
Let’s take a full 5-day week at £500/day. That’s £2,500 total assignment rate.
| Breakdown Item | Amount |
|---|---|
| Assignment Rate | £2,500.00 |
| Umbrella Margin (weekly fee) | -£20.00 |
| Employer National Insurance (13.8%) | -£345.00 |
| Apprenticeship Levy (0.5%) | -£12.00 |
| Gross Salary Before Tax | £2,123.00 |
| Income Tax (approx. mix of 20–40%) | -£410.00 |
| Employee National Insurance | -£196.00 |
| Estimated Take-Home Pay | £1,517.00 |
That’s before pension or student loan. So if you’ve been auto-enrolled, expect a few more pounds off the top.
You can already see how much of that £2,500 vanishes before you even get to the gross salary. The employer NI and levy alone eat £357. Add the margin, and that’s £377 gone. Then from the gross, you still pay tax and NI like every other employee.
If the employer NI rate increases to 15%, which is on the cards from April 2025, your gross pay drops even more. The employer cost goes up, which means less of the assignment rate makes it to your salary.
| Scenario | 13.8% NI | 15% NI |
|---|---|---|
| Employer NI Deduction | £345.00 | £375.00 |
| Adjusted Gross Pay (before tax) | £2,123.00 | £2,093.00 |
| Take-Home After PAYE (est.) | £1,517.00 | £1,489.00 |
That’s almost £30 lost every week from a simple 1.2% rate increase. Over a year, that’s over £1,500.
If you’re on a higher day rate, the impact grows. On a £750 daily rate, you’ll lose closer to £50–£60 per week when employer NI goes up. And it’s not optional. Every umbrella must deduct it.
How to check your NI on your payslip
Your payslip will show employee NI as a separate line, but employer NI won’t appear—it’s taken before your salary is calculated.
Your payslip will list your gross salary, income tax, employee NI, and other statutory deductions. You won’t see employer NI listed there because it’s already taken from the assignment rate before your gross salary was worked out.
This catches most people off guard. You might be thinking: “Where’s the other NI?” It’s not hiding. It was never part of your salary in the first place. But since it came from your total contract rate, it still affects what you get.
To see how it’s calculated, ask your umbrella for a full rate breakdown. A clear payslip or a Key Information Document (KID) should show:
- Assignment rate from the agency
- Deductions for employer NI and levy
- Weekly umbrella margin
- Gross salary paid through PAYE
- Income tax and employee NI
- Net pay into your bank
If that’s missing, or if your umbrella refuses to explain it clearly, that’s a red flag. A compliant umbrella company will walk you through every line without delay.
Final thoughts
Umbrella payroll looks messy until you know what’s happening under the hood. You’re not getting taxed unfairly. But you are picking up costs that most full-time employees don’t even see. That’s because your rate includes everything—your pay, your employer’s costs, and the umbrella’s fee.
Two National Insurance charges on the same payslip might feel like a glitch. It’s not. One’s yours. One’s the company’s, but taken from your rate. That’s how PAYE works under umbrella.
If you’re trying to calculate your real take-home, don’t just rely on what someone quotes. Use real numbers. Factor in both NI charges. Question estimates that sound too generous. And check your payslip every single week.
Because when you’re working hard and invoicing £2,500 a week, you deserve to know where every pound is going—and why only £1,500 shows up in your account. That’s not a mistake. That’s umbrella payroll with employer NI included.
