CIS vs PAYE vs Umbrella: A Contractor's Guide to Compliant Agency Labour
Last updated: April 2026 · 8 min read · For contractors and site teams
Buying construction labour through an agency puts you in a supply chain that HMRC increasingly polices from both ends. The payroll model an agency uses to pay its workers changes your cost, your compliance exposure, and — where things go wrong — your reputational risk. This guide compares CIS, PAYE and umbrella from the contractor's point of view, without the jargon.
For a worker-focused comparison, see CIS vs PAYE Explained.
The three models at a glance
| PAYE | CIS | Umbrella | |
|---|---|---|---|
| Who employs the worker | Agency | Nobody — self-employed | Umbrella company |
| Employer NI paid | Yes | No | Yes (via umbrella) |
| Holiday pay accrued | Yes | No | Yes |
| Deduction at source | Full PAYE | 20% (30% unverified) | Full PAYE |
| Suitable for | Ongoing site labour, staff-like roles | Genuine subcontract packages | Workers moving between agencies |
| Contractor risk | Low | Higher — status must be genuine | Low if umbrella is FCSA-accredited |
Who carries which obligations
Regardless of the payroll model, responsibility is shared between the agency (or umbrella) and you as the site occupier.
Agency / umbrella owns
- • Right to Work checks before deployment
- • CSCS / CPCS / PTS / ticket verification
- • Payroll, tax deductions, RTI returns
- • Employer's Liability insurance
- • Public Liability insurance for the workforce
- • Employment contract and holiday pay
- • Basic pre-deployment H&S briefing
Site occupier / contractor owns
- • Site-specific induction
- • RAMS for tasks performed
- • Site-specific PPE beyond baseline
- • CDM duties
- • Supervision and direction of work
- • Reporting accidents on your site
- • Verifying agency compliance annually
Where CIS goes wrong
CIS is only compliant where the worker genuinely operates as a subcontractor — they choose how to do the work, provide their own tools where relevant, and can send a substitute. If a labourer turns up at 7am, follows the site manager's instructions all day, uses site tools, and is told when to break, that is employment, not subcontract. Paying that worker under CIS is false self-employment. HMRC investigates the chain, and the "employer" test can shift the tax debt.
Mini-umbrella schemes — where one worker is spread across many small companies to abuse the Employment Allowance — are another red flag HMRC actively targets. If a worker's payslip shows a different employer name each fortnight, ask questions.
What compliant supply looks like in practice
At a minimum, your agency should be able to produce, per booked worker, within 24 hours:
- • Right to Work check evidence (share code or document copy dated before start)
- • Verified ticket printout (CSCS Smart Check or equivalent)
- • Payroll model declaration (PAYE / umbrella name / CIS UTR)
- • Signed assignment schedule showing rates and duration
- • Insurance certificates covering the assignment period
Read our compliance standards, our approach to Right to Work and vetting, and the payroll and compliance partners we work with.