For certain clients, you may have the option to be paid PAYE through Worksome on your contract, which means we will handle your tax & NI deductions before payments are made to you. It's important to note, our PAYE service is setup by your client on a contract-by-contract basis. Please find the steps below:
Freelancers: Adding your PAYE Settings in Worksome
To be paid PAYE through Worksome, there are some settings you will first need to add in your account.
1. Your Business Entity
In your Freelancer Settings in Worksome, set your business entity as below.
No setup yet + select yes to working with PAYE ✅
2. Your PAYE Settings
Once you have completed the above, you'll unlock a new PAYE Settings page in Worksome. You will need to fill in all required fields here, to ensure you are taxed correctly on your payments:
And that's it! Your client can now offer you a PAYE contract (see steps below). You will receive a 'KID' (key information document) with your contract, which will provide you with an estimated financial breakdown from your bill rate to an anticipated net pay (after deductions). You can also find some more PAYE FAQs at the end of this article.
Companies: Setting up a PAYE contract for your freelancer
For your freelancer to be paid PAYE through Worksome, there are some steps you will need to action when offering the contract. Your freelancer will first need to add their PAYE settings in Worksome as outlined above.
You can then proceed with your contract offer.
During the contract setup, you'll be asked to clarify the contract type for the job. Your first question will ask if it's a Statement of Work contract. You will need to select NO to this:
You'll then be asked if it's a PAYE contract, and will need to click YES to allow your freelancer to proceed on PAYE:
You can then proceed through the contract offer as normal - your freelancer will receive their contract offer to accept, along with a 'KID' (key information document), which will provide them with an estimated financial breakdown from their charge rate to an anticipated net pay (after PAYE deductions).
Note: If you had already offered a contract, before the freelancer decided to proceed on PAYE or add their PAYE settings. You will need to cancel it, and re-offer the contract, after they have completed their PAYE settings.
Frequently Asked Questions
Deductions & Payments
Will Worksome operate as PAYE for all of my clients/agencies?
We can operate in this way, for contracts you have with our enterprise clients on Worksome. If you're unsure whether your client fits this criteria, feel free to message our friendly support team 🤗 Just hit the chat button in the bottom-right corner.
Is there a cost to use Worksome's PAYE service?
The standard fee for Worksome's PAYE service is 1% (based on your bill amount). This might differ depending on the client you are working with. Reach out to Worksome support for specific pricing related to your contract.
Do I need to send you my P45?
You can send your P45 to to email@example.com.
But it is entirely your responsibility to make sure you also have added your correct Tax Code in your PAYE settings, to ensure you are taxed correctly on any payments.
I have other clients on Worksome, can I be paid for all of them on Worksome PAYE?
Yes, but additional service fees of up to 5% of your charge rate may apply. Please contact Worksome Support to talk through your options.
I want to switch between PAYE and other business entities (such as Sole Trader or LTD) for different contracts. How does this work in my Worksome account?
This is not technically possible at the moment. The solution is for you to create two different Worksome accounts, one to use for each of your business entities.
Do I need to tell you each time I have a new PAYE contract in Worksome?
No, this is not necessary. If you need to run the contract using Worksome as PAYE, you'll have to let your client know that you wish to do so, and they then can follow our guide to set this up when offering you the contract.
Deductions & Payments
Where would I find my tax code, and why is this needed?
Your tax code dictates how much income you can earn before paying tax. If you are being paid PAYE by Worksome, you'll need to provide this in your PAYE settings to ensure the right amount of tax is deducted on your payments. You can find out more here: https://www.gov.uk/tax-codes
If you don't know which tax code you should be using for this tax year, you should consult HMRC. If HMRC has not issued a tax code for you yet, then you can enter an emergency tax code such as 1257LW1 (if you bill your client weekly), and 1257LM1 (if you bill monthly) for the time being to receive your payments until HMRC issues you the correct code. Any discrepancy with the amount of tax you pay will be corrected when HMRC issue a new tax code for you.
What should I input as my Starter Form answer?
In your PAYE settings, you'll see you have a Starter Form question to answer, to let us know your current employment status.
If you are unsure of your starter form answer, we would recommend speaking with HMRC or your accountant to confirm. As what you input here will be used on your payroll with us, and could affect your tax deductions. So if unsure, check with the experts just to be sure! 📝
What will my deductions be when on PAYE?
If you choose to use our PAYE service for your contract, this means we would be responsible for deducting employment taxes & NI contributions on your payments - the standard tax brackets for your employee deductions can be found on HMRC's website.
Depending on your client, we may need to deduct further employer costs of 14.3% from your Charge Rate. This calculates as the Employers NI at 13.8% and Apprenticeship Levy (AL) at 0.5% and would in effect reduce your Booking Fee. These standard PAYE deductions, as per HMRC, are the same deductions you would incur with any Umbrella company.
Whether or not we have to deduct these employer costs, will depend on the client you are working with. Some clients are willing to cover the cost of employer's contributions, and others are not. So it will entirely depend on your client, and their approach to PAYE contracts. You will receive a 'KID' (key information document) with your contract offer, which will provide you with an estimated financial breakdown from your bill rate to an anticipated net pay, and will detail all expected deductions as above:
Shouldn't my client be covering my employer tax contributions?
If you disagree with paying the employer tax contributions from your charge rate, you will need to discuss this with your client directly, as it is their decision.
Your employer is required to pay employers tax contributions (NI & AL), but your employer is also free to change the rate they are ready to offer you. In many cases, the employer is forced to reduce their final rate (your gross pay) to make room for additional hiring costs due to the change from independent contractor to PAYE. Generally, the additional costs associated with the PAYE setup has to be covered by either your client, yourself or shared among you. This is based on whatever agreement you have negotiated with your client and their policy on this matter.
Can I increase my rate to cover the extra costs incurred?
Any changes to your contract rate need to be agreed between yourself and your client. And whatever final rate you agree on can be added on your Worksome contract by your client.
When I submit a bill, when will I be paid?
You will be paid as per the contract payment terms with your client. You can find this in your Worksome contract for the job, under "payment terms":
When using our PAYE service on a contract, you will no longer be paid into your Worksome balance for any bills. You will be paid directly to your bank account, which you have provided in your Worksome settings 💸
What happens if my bank details need to change?
It is entirely your responsibility to make sure your bank details are up to date in your Worksome settings. You can check / change your bank details here: https://use.worksome.co.uk/profile/edit#bank-setup
How will my Pension work?
After 3 months of working with Worksome on payroll, we are legally obliged to auto-enrol you into a company pension plan. Our chosen pension provider is the government backed NEST. Should you choose to, you can opt out of NEST and the process to do so will be in their enrolment letters they will send you upon enrolment.
Can I contribute to my own personal pension through Worksome?
It will not be possible for us to contribute to your private pension as it would be impossible to manage multiple pension funds. But if you choose to, you will be able to opt out of NEST, which will be detailed in the letters you will receive from them upon enrolment (after 3 months of being on payroll through Worksome).
How does Holiday Pay work when on PAYE with Worksome?
As per UK law, all payroll employees are entitled to 5.6 weeks paid holiday each year. This amounts to 28 days for contractor workers (5.6 times the standard working week of 5 days = 28 days.) If you work fewer days per week, or for just a few months out of the year, for example, then your holiday pay entitlement would be calculated on a pro-rata basis.
For contractor workers, the percentage typically used to calculate holiday is 12.07% of your hourly rate.
> 5.6 weeks of holiday allowance ÷ 46.4 working weeks = 12.07% of your gross taxable pay set aside for holiday.
For example, if your taxable pay each month is £2000, the holiday pay accrued each month would be £241.40 (12.07% of £2000) and would be detailed on your payslip as such. This is essentially a payment in advance of the actual weeks you may take your holiday, and means that you are constantly up to date with the money you are entitled to for holiday pay.
How is the Holiday Pay transferred to me?
Holiday pay is calculated at 12.07% of your hourly rate, as detailed above.
In the same way that many Umbrella/PAYE services operate, Worksome will ‘roll up’ your holiday pay into your ordinary salary calculations, as part of your payments. Therefore it is subject to income tax & NI deductions, just like the rest of your salary. This will be detailed in the payslip you'll receive once you're on payroll.
If you have any further queries about how holiday pay works when on PAYE, we would recommend speaking with your accountant or a tax advisor. The rules with HMRC are complex, and your accountant would be able to advise you clearly on how holiday pay works when on PAYE.
How do I 'book' Holiday days?
The simple answer is, you don't 🏖️ On PAYE, you receive holiday pay as part of your salary, as outlined above, which means you are constantly up to date with the money you are entitled to for holiday pay.
Since you have already been paid for holiday, you should not enter any holiday dates dates on your timesheet or bill in Worksome when taking a day off.
How does sick pay work?
You would receive statutory sick pay at the government stipulated rate of £95.85 per week (£19.17 per day) from the 4th consecutive day of leave. The UK government does not refund this cost making it an additional charge to the employer and is why all PAYE/Umbrella services operate this way.
How does Expenses work when on PAYE?
You can submit your expenses in the usual way. See our guide to submitting expenses here.
When you are on PAYE, you will be paid gross for any expenses, since these are not subject to any tax deductions.
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