Payment guide for agency nurses – PAYE, umbrella or limited?

As a busy agency nurse, you have better things to do than try to figure out what your pay packet will include. If you’re more interested in triage than taxes you can relax. The Pulse guide to agency nurse payments makes it simple.

What do agency nurses get paid?

The initial rate of pay for nurses is based on the NHS banding system, or grades.

Other factors include:

  • The time – night shifts are paid at a higher rate than day shifts
  • The day – bank holidays and Sundays are paid at a higher rate
  • The setting and speciality – ITU or emergency department nurses command a higher rate than general settings
  • The Trust’s location – inner London pays more than outer London, or other areas of the country
  • Client type – NHS or private healthcare
  • Payment type – PAYE, umbrella company or limited company

NHS agency nurse pay rates in the UK

Pay for agency nurses working in the NHS depends on whether the agency is on an NHS Framework or is “off framework”.

Here at Pulse, we work within the NHS Framework as approved suppliers who have been vetted and audited as supplying highly qualified staff at a competitive price – we’re great for nurses, patients and the NHS.

What is PAYE?

PAYE, which stands for pay as you earn, is tax based on your income which is deducted from your salary by your employer. In the case of agency nurses your employer may be the agency, an umbrella company, or your own limited company. If you are self-employed you will have to file a self-assessment tax return with HMRC.

PAYE is affected by how much you earn over a year – if you earn over £12,570 in a financial year (6th April – 5th April), you will have to pay income tax. National Insurance (NI) contributions and student loan repayments are also deducted through PAYE, if applicable. The tax you pay on your income helps to fund public services – including the NHS – and is a mandatory legal responsibility.

Agency nursing pay through PAYE

You can choose to be paid through the PAYE system via Pulse (although some agencies do not allow this, in order to reduce their costs). After the healthcare setting has paid Pulse for your shift, we take care of your NI and other deductions, before paying you your salary. This means that you don’t have to file your own tax returns and we shoulder the administrative responsibility.

The downsides

You may find that operating under your own limited company means that you can take advantage of certain tax relief benefits which are not available this way. Read on to find out more.

What is an umbrella company?

Some agency nurses choose to be paid through an umbrella company – a business that acts as your employer by processing timesheets and taking care of tax deductions.

The umbrella company is responsible for paying the agency worker, after making the necessary NI and other deductions. They also take an amount as their charge for this service.

So, working through an umbrella company looks like this:

The pros and cons of umbrella companies

Joining an umbrella company is generally simple and fast – you may be able to begin your first shift within a few hours. And since the umbrella company takes care of the tax and other deductions, you can get on with caring for patients without worrying whether you’ve filled in your tax return properly.

You will be officially classed as an employee of the umbrella company which means you’re entitled to sick pay, holiday pay and parental/adoption leave. As Pulse offers a competitive benefits and rewards package anyway, this may not be much of an incentive…

The downsides

Umbrella companies can be a great choice, but they’re not right for everybody. You will still have to submit timesheets and, if applicable, expenses claims, so unfortunately not all of the paperwork can be taken care of by an umbrella company.

As well as some excellent umbrella companies, there are disreputable ones out there who offer the moon on a stick – but fall far short.

If an umbrella company is offering 80 or 90% of your pay to take home – you should be asking questions. Some umbrella companies operate under tax evasion schemes which leave you at risk of fines, penalties or even a prison sentence.

You may find you come away with a lower hourly rate than your limited company, or PAYE colleagues due to the umbrella company’s fees. These vary depending on the company, and can range from £15-30 per week, or £80-130 per month – definitely something to factor into your decision making process.

What is a limited company?

Another popular option among agency workers is to set up your own limited company – also known as a personal service company or PSC.

For those working in the NHS, the agency pays employer costs such as NI and other deductions, and then pays the net salary to the worker.

For those working at private assignments, this will be the case from April 2021.

The pros and cons of limited companies

As director of your own limited company you can choose to split your income between your salary and dividends, and you could be eligible for certain tax reliefs, meaning a limited company may be financially advantageous.

The downsides

However, with a potentially higher salary comes the administrative responsibility of having to keep accurate and detailed company records, and file your accounts and company tax return.

At Pulse, we would always advise speaking to a qualified financial advisor to ensure that you’re making the choices that are right for you, while remaining within the law.

Which payment option is best?

Which payment option is best for an agency nurse is an individual decision.

It’s important to note that, although at Pulse we allow our nurses to make this choice, some agencies will insist on one method over another (which one will depend on the individual agency’s preference).

How to get paid? You decide!

We hope this guide has answered your questions on agency payment options, and made the process of getting paid a little clearer.

And remember, whatever you choose, we’ll support you.