CIS vs PAYE Explained: What Construction Workers Need to Know in 2026
Understanding the difference between CIS (Construction Industry Scheme) and PAYE (Pay As You Earn) is essential for anyone working in UK construction. This guide breaks down both systems, their pros and cons, and how they affect your pay, tax, and rights.
What Is PAYE?
PAYE is the standard employment model. Your employer deducts Income Tax and National Insurance from your wages before you receive them. You are classified as an employee and receive all statutory employment rights.
PAYE Benefits:
- Holiday pay (28 days minimum)
- Statutory sick pay
- Workplace pension contributions
- Employer's liability insurance
- No self-assessment tax return needed
- Employment rights protection
What Is CIS?
CIS is a tax deduction scheme run by HMRC for the construction industry. Under CIS, the contractor deducts 20% (or 30% if unregistered) from your gross pay and passes it to HMRC. You are classified as self-employed and responsible for your own tax affairs.
CIS Considerations:
- No holiday pay or sick pay
- No employer pension contributions
- Must complete annual self-assessment
- Responsible for own insurance
- No employment rights protection
- May be affected by IR35 legislation
Side-by-Side Comparison
| Feature | PAYE | CIS |
|---|---|---|
| Tax deduction | At source by employer | 20% deducted by contractor |
| Holiday pay | Yes (statutory) | No |
| Sick pay | Yes (SSP) | No |
| Pension | Auto-enrolled | Self-arranged |
| Tax return | Not usually required | Annual self-assessment required |
| Employment rights | Full protection | None (self-employed) |
| Insurance | Covered by employer | Must arrange own |
Why Hard Hat Uses PAYE
Hard Hat Recruitment operates exclusively on a PAYE basis. We believe this provides the best protection for workers, the strongest compliance position for our clients, and eliminates any risk of tax liability or IR35 issues. Every worker we supply is a PAYE employee with full statutory rights.