PAYE vs Umbrella Companies: Why Teachers Together's Approach Benefits You

Understanding Your Payment Options as an Education Professional

When looking for supply teaching or support staff roles in education, one crucial aspect that's often overlooked is how you'll be paid. At Teachers Together, we believe in complete transparency about our payment methods and why they benefit you.

This guide explains the key differences between direct PAYE (Pay As You Earn) employment- which we proudly offer - and umbrella company arrangements that many other agencies use. But beyond the practical differences, we’ll also explore the ethical implications of these payment choices, especially when it comes to public sector funding.

The Basics: What is PAYE vs an Umbrella Company?

PAYE Employment (Our Approach)

With Teachers Together's PAYE system, we act as your direct employer. We handle all tax and National Insurance contributions on your behalf, paying you directly with no middleman involved. Your monthly payslip clearly shows your earnings and deductions, with holiday pay accrued separately and pension contributions managed transparently.

Umbrella Company Arrangements

Many recruitment agencies use umbrella companies as intermediaries. When working through an umbrella company, you become technically "employed" by that company rather than the agency. The umbrella company processes your pay, often charging fees for their services and passing various employment costs on to you.

Don't Be Misled by "Higher" Day Rates

One of the most common misconceptions in the education recruitment sector is that a higher advertised day rate through an agency which uses an umbrella company means more money in your pocket. This is rarely the case.

While an agency using an umbrella company might advertise a day rate higher than our standard day rates, once you account for all the additional deductions they make, you could actually take home less money overall.

What Umbrella Companies Often Don't Tell You Upfront:

1. You pay the employer's costs - With many umbrella arrangements, you effectively pay both the employee AND employer costs, including:

   • Employer's National Insurance contributions

   • Apprenticeship Levy

   • Employer's pension contributions

2. Service fees are deducted from your pay - Umbrella companies typically charge a weekly or monthly "service fee" (often called a "company margin")

3. Confusing payslip structures - Many education professionals report difficulty understanding exactly what they're being paid and why with umbrella company arrangements

Supporting the System We Serve: Our PAYE Commitment

At Teachers Together, we see ourselves as part of the education ecosystem. The schools we work with receive their funding from public sources, and we believe our business practices should align with and support this system.

By employing our members through direct PAYE, we ensure that appropriate employer contributions and t axes flow back into the public funding system – the same system that ultimately pays for our services. We see this as a more transparent and sustainable approach to education recruitment.

When education professionals understand exactly how they're being paid and what deductions are being made, they can focus on what they do best—supporting students' learning. A straightforward PAYE approach creates clarity for everyone involved while ensuring education funding continues to circulate appropriately within the system it was designed to support.

Why We Choose PAYE for Our Members

At Teachers Together, we've chosen the PAYE model because it aligns with our core values of transparency, fairness, and genuine support for education professionals. Here's what our approach gives you:

1. Complete Transparency

• No hidden fees or surprise deductions

• Clear monthly payslips showing exactly what you've earned and any deductions

• Straightforward holiday pay accrual at 12.5%

  
  

2. Enhanced Benefits

• Enhanced pension contributions of 5% from day one (exceeding the standard minimum of 3% after three months)

• Holiday pay accrued separately and paid during school holidays at 12.5%

• No admin fees or additional charges

• Real Living Wage Foundation accredited employer

  
  

The pension difference is significant over time. Consider that with standard arrangements, you typically need to earn over £520 per month to qualify for employer pension contributions, and even then, the minimum legal contribution is just 3%. Our 5% contribution from day one on your full earnings means substantial additional retirement savings.

For example, on average earnings of £1,000 per month:

• Minimum legal approach: £0 for first three months, then approximately £30/month (3% on earnings above threshold)

• Teachers Together approach: £50/month from day one (5% on full earnings)

  
  

That's potentially hundreds of pounds more in your pension pot each year.

3. Professional Development Support

• Free online certified training modules

• Complimentary membership to the Chartered College of Teaching

• Exclusive access to in-person training workshops and networking events

  
  

The Growing Concern Around Umbrella Companies

Recent investigations have highlighted serious issues with some umbrella company arrangements. Some temporary workers have found out years later that they had inadvertently been part of tax avoidance schemes through their umbrella companies and face significant tax demands from the HMRC. The UK government's "Don't Get Caught Out" campaign warns workers about potential tax avoidance schemes operated through some umbrella companies, which can lead to unexpected tax bills years later.

Major teaching unions including NASUWT have expressed concerns about umbrella arrangements, noting that they can lead to reduced take-home pay and confusion over employment rights.

Questions to Ask Before Accepting a Role

If you're considering a position with another agency that uses umbrella companies, be sure to ask:

1. What is the ACTUAL take-home pay after ALL deductions?

2. Who pays the employer's National Insurance and pension contributions?

3. Are there any weekly or monthly fees deducted from my pay?

4. How is my holiday pay calculated and when will I receive it?

5. What happens if I work at a school that decides to hire me permanently?

Our Commitment to You

At Teachers Together, we believe that every student deserves access to passionate and well-supported educators. By employing our members directly through PAYE, we ensure you receive fair compensation, clear communication, and valuable professional development opportunities.

We're proud to serve the education sector in Hertfordshire, Luton and Bedfordshire with a uniquely collaborative approach that benefits both our members and our partner schools.

If you have any questions about our payment structure or would like to discuss joining our community of dedicated education professionals, please get in touch.