Glossary · Compliance

What is PAYE

Definition

Pay As You Earn: the UK system for deducting income tax and National Insurance at source. The default for agency temps employed directly.

Applies to: UK · Reviewed by James Doyle

In practice

PAYE temps carry employer National Insurance, pension auto-enrolment and holiday pay accrual, which together commonly add around 20% to pay cost.

Holiday pay accrual is the item founders most often forget when pricing a first UK temp desk.

A UK payroll intermediary that employs contractors and processes PAYE on their behalf, used widely for inside-IR35 assignments.

Every employer cost on top of the pay rate: payroll taxes, workers' compensation, holiday accrual and benefits. Typically 12% to 16% in the US.

UK off-payroll working rules that decide whether a contractor working through their own company should be taxed as an employee.

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