PAYE stands for Pay As You Earn. What this means in practice is that you pay tax directly from your salary each month. It’s deducted based on your exact earnings and calculated using your tax code.
When you’re employed or you work under an umbrella company, you’re usually paid via PAYE. And this means that you also get other employee benefits such as holiday and sick pay, along with benefits offered by certain employers e.g. private healthcare. Good luck finding those employers, from my experience they are few and far between. If you are a construction employer offering good benefits, please contact me and change my perception about construction companies. PAYE in construction is basically a 0 hour contract. You will pay higher tax and NI contributions working under this scheme therefore more people will want to be paid via CIS. It is also worth noting that you will generally be paid weekly via CIS and monthly via PAYE.
Here is a comparison between the two:
Comparison of CIS vs PAYE
- Holiday Pay
- CIS: ❌
- PAYE: ✅
- Sick Pay
- CIS: ❌
- PAYE: ✅
- Tax Rebate
- CIS: ✅
- PAYE: ❌
- File a Tax Return
- CIS: ✅
- PAYE: ❌
- Claim Back on Expenses
- CIS: ✅
- PAYE: ❌
- Employment Protection
- CIS: ✅
- PAYE: ✅
- Option to be Paid Gross
- CIS: ✅
- PAYE: ❌
- National Insurance Automatically Deducted
- CIS: ❌
- PAYE: ✅
- Job Freedom
- CIS: ✅
- PAYE: ❌