Understanding Employer National Insurance and Your Umbrella Payslip

Umbrella payslips can sometimes look a little different from a standard payslip.

One of the main reasons for this is that an umbrella payslip usually shows both the employment costs linked to your assignment and the deductions taken from your personal taxable pay.

This means you may see items such as Employer’s National Insurance, Apprenticeship Levy, employer pension contributions and the umbrella company margin shown before your gross pay is calculated.

These deductions are not employee deductions. They are employment costs that are taken from the assignment rate agreed with the agency or end client before your gross taxable pay is worked out.

In this guide, we explain why employer NI appears on umbrella payslips, how employer NI contributions are calculated, and what each section of your Ovio payslip means.

Why does Employer National Insurance appear on an umbrella payslip?

When you work through an umbrella company, the umbrella becomes your employer for payroll purposes.

The agency or end client pays an assignment rate to the umbrella company. This assignment rate is designed to cover the full cost of your employment, not just your gross pay.

That means the assignment rate needs to cover:

• Your taxable gross pay
• Employer National Insurance
• Apprenticeship Levy
• Employer pension contributions, where applicable
• Holiday pay, depending on how this is paid
• The umbrella company margin
• Any other agreed employment costs

Employer’s National Insurance appears on your payslip because it is part of the total employment cost funded from the assignment rate.

It is important to understand that employer NI is not deducted from your gross pay. Instead, it is calculated before your gross pay is finalised.

This is why your assignment rate and your gross pay are not the same thing.

What is the assignment rate?

The assignment rate is the rate paid to the umbrella company by the agency or end client for the work you have completed.

This is sometimes higher than a normal PAYE hourly or daily rate because it includes the employment costs that need to be covered before your taxable pay is calculated.

For example, the assignment rate may include enough funding to cover:

• Employer NI contributions
• Apprenticeship Levy
• Employer pension costs
• Holiday pay
• The umbrella company margin

Your payslip shows how the assignment income is allocated so you can see how the final taxable pay and net pay are reached.

What is Employer National Insurance?

Employer National Insurance, also known as employers national insurance, employer NI or employer NI contributions, is a contribution paid by employers to HMRC.

For the 2026/27 tax year, employers pay National Insurance at 15% on earnings above the Secondary Threshold.

The Secondary Threshold for 2026/27 is:

• £96 per week
• £417 per month
• £5,000 per year

This is the point at which employers start paying employers NI.

The Secondary Threshold for 2025/26 was also £96 per week and £417 per month, which is why you may see references to the secondary threshold 2025/26 when reading about employers NI.

How is Employer NI calculated on an umbrella payslip?

Employer NI is calculated on the taxable employment income above the relevant Secondary Threshold.

A simplified example:

If taxable employment income for the period is £700 per week, employer NI is calculated on the amount above the weekly Secondary Threshold.

£700 minus £96 = £604

Employer NI is then calculated at 15% of £604.

£604 x 15% = £90.60

So, in this simplified example, the employer NI contribution would be £90.60.

The exact calculation on your payslip may vary depending on your pay period, pension status, tax code, holiday pay treatment, expenses, and any other relevant payroll details.

Why is Employer NI not the same as Employee National Insurance?

There are two different types of National Insurance shown on many umbrella payslips:

Employer’s National Insurance
This is the employer cost. In umbrella payroll, it is funded from the assignment rate before gross pay is calculated.

Employee National Insurance
This is your personal National Insurance deduction. It is deducted from your gross pay through PAYE, alongside tax and any other employee deductions.

For 2026/27, employee National Insurance is generally charged at:

• 8% on earnings between the Primary Threshold and Upper Earnings Limit
• 2% on earnings above the Upper Earnings Limit

This is separate from employer NI.

Understanding the company deductions section

The company deductions section shows the employment costs that are taken from the assignment income before your gross taxable pay is calculated.

These are not personal deductions from your gross pay. They are costs linked to employing you through the umbrella company.

Ovio Margin

The Ovio Margin is what Ovio retains for processing your payroll and providing umbrella employment services.

This covers things such as payroll administration, compliance checks, support, payslip production, payments to HMRC, and access to Ovio’s contractor support services.

The margin is deducted from the assignment income before your gross taxable pay is calculated.

Apprenticeship Levy

The Apprenticeship Levy is a government charge paid by larger employers.

Umbrella companies may show this on the payslip because it forms part of the employment cost funded from the assignment rate.

It is not a personal tax deduction from your gross pay. It is an employer cost calculated before your taxable gross pay is finalised.

Retained Holiday Pay

Holiday pay can be handled in different ways depending on your contract and payment setup.

Where holiday pay is retained, a portion of your assignment income is set aside and paid to you when you take holiday or request payment, depending on the agreed process.

Where holiday pay is advanced, it is usually paid to you alongside your regular pay instead of being held back.

Your payslip will show how holiday pay has been treated for that period.

Employer Pension

If you are enrolled into a workplace pension scheme, the employer may also make an employer pension contribution.

This is separate from your own employee pension contribution.

The employer pension contribution is treated as an employment cost and is taken into account before your gross taxable pay is calculated.

Employer’s NI

Employer’s NI is the employer National Insurance contribution due on your employment income above the relevant threshold.

On an umbrella payslip, this is shown so you can see how the assignment rate has been used before your gross pay is calculated.

It is not deducted from your gross pay. It is part of the cost of employment funded from the assignment rate.

Expenses

If you have approved allowable expenses, these may appear in the company deductions or income sections depending on how they are processed.

Genuine allowable expenses are usually reimbursed separately from taxable pay, subject to HMRC rules and evidence requirements.

Where expenses are tax-free, they do not usually attract PAYE tax or employee National Insurance.

Understanding the employee income section

The employee income section shows how your taxable and non-taxable income is built after employment costs have been accounted for.

Basic Pay

Basic Pay is usually shown at least at the relevant National Minimum Wage or National Living Wage rate for the hours worked.

From April 2026, the National Living Wage for workers aged 21 and over is £12.71 per hour.

Umbrella payslips often show Basic Pay separately so it is clear that minimum wage requirements are being met.

Expenses — Tax Free

Approved tax-free expenses may be shown as part of your payment but are not treated in the same way as taxable wages.

This means they are usually paid without PAYE tax or employee National Insurance being deducted, provided they meet HMRC rules.

Additional Pay

Additional Pay is the remaining taxable income once the assignment rate has been allocated across employment costs, basic pay, holiday pay treatment, expenses, and any other relevant items.

This is sometimes the part contractors find most confusing.

In simple terms, Additional Pay is the amount left over from the assignment rate after the required employment costs have been accounted for.

It forms part of your taxable gross pay.

Understanding employee deductions

Employee deductions are taken from your gross taxable pay through PAYE.

These are the deductions most people are used to seeing on a standard payslip.

Tax

Income Tax is deducted from your taxable pay based on your tax code and the current tax bands.

For many workers, the standard Personal Allowance is £12,570 per year. This is the amount of income you can usually earn before paying Income Tax, although this can change depending on your individual circumstances and tax code.

Your tax code tells payroll how much tax-free allowance to apply.

National Insurance

Employee National Insurance is deducted from your gross pay.

This is separate from employer NI.

For 2026/27, employee NI is generally charged at 8% on earnings between the Primary Threshold and Upper Earnings Limit, and 2% on earnings above the Upper Earnings Limit.

Student Loan

If HMRC tells Ovio that student loan deductions apply, these will be deducted through payroll.

The amount depends on your student loan plan, your earnings, and the relevant repayment threshold.

Ovio does not decide whether student loan deductions apply. This is based on HMRC instruction and the information connected to your student loan record.

Employee Pension

If you are enrolled in a workplace pension, your employee pension contribution will be deducted from your pay.

This is your personal pension contribution and is separate from any employer pension contribution.

The amount deducted will depend on the pension scheme rules, your pensionable pay, and whether you have opted in or opted out.

Service Pack

Service Packrelates to Ovio’s optional benefits package.

If you choose to access additional services or benefits through Ovio, the cost may appear on your payslip as Service Pack.

This will only apply where the relevant benefits package has been selected or agreed.

Assignment rate vs gross pay: what is the difference?

The assignment rate is the total rate paid to the umbrella company for your work.

Gross pay is the taxable employment income you receive after employer costs have been accounted for.

The two figures are different because the assignment rate has to cover the full cost of employment.

A simplified flow looks like this:

Assignment rate

Minus employer costs such as margin, employer NI, employer pension and holiday pay

Equals gross taxable pay

Minus employee deductions such as tax, employee NI, student loan and employee pension

Equals net pay

This is why your payslip may show a higher assignment rate at the top, followed by employment costs, before arriving at your gross pay and final take-home pay.

Why transparency matters

Umbrella payslips can look complex, but they are designed to show how your assignment income has been processed.

At Ovio, we believe contractors should be able to see clearly:

• What the agency or end client has paid
• What employment costs have been applied
• What your taxable gross pay is
• What personal deductions have been taken
• What your final take-home pay is

Understanding your payslip helps you understand the difference between your assignment rate, gross pay and net pay.

It also helps you spot where employer NI contributions, employee National Insurance, tax, pension, holiday pay and expenses fit into the calculation.

Need help understanding your payslip?

If you are unsure about anything on your payslip, speak to the Ovio team.

We can walk you through each section, explain how your assignment rate has been calculated, and help you understand the deductions shown on your payslip.