What is CIS and how does it work for agency workers?

CIS (Construction Industry Scheme) is HMRC's system for managing tax on payments to self-employed construction workers. Under CIS, the agency deducts 20% tax from your gross payment at source (30% if you are not registered with HMRC as a CIS subcontractor) and pays it directly to HMRC on your behalf. You then complete a self-assessment tax return each year and reclaim any overpaid tax. Most experienced temp construction workers prefer CIS because the gross rate is higher than the net PAYE equivalent, and allowable business expenses (tools, travel, PPE) can be claimed via self-assessment.

What is the difference between CIS and PAYE for construction workers?

Under PAYE (Pay As You Earn), you are employed by the agency and have tax, National Insurance, and any pension contributions deducted automatically from each payslip. You receive employment rights including holiday pay accrual and sick pay entitlements. Under CIS, you are self-employed — you receive a higher gross payment but manage your own tax via self-assessment. CIS typically results in higher take-home pay on equivalent gross rates, but requires you to manage your own finances and tax return.

What is an umbrella company and should I use one?

An umbrella company acts as your employer — they receive payment from the recruitment agency, deduct their margin (typically £15–£30/week), and then pay you as an employee under PAYE. You get employed status and employment rights, but your take-home is typically lower than CIS. Umbrella companies can be convenient if you want simplicity and PAYE status. Be cautious of umbrella companies offering unusually high take-home through loan arrangements — HMRC has aggressively pursued these as avoidance schemes and many workers have faced large unexpected tax bills.

How are timesheets processed and when do I get paid?

Most construction agencies process timesheets on a weekly cycle. You submit your timesheet (via an online portal or app) by the agreed cut-off — typically Friday at midday or end of business. The agency requires client approval (site manager or supervisor sign-off) before processing. Payment is made via BACS transfer — typically Friday or Monday of the following week. Always confirm the payment schedule with your agency at registration.

Am I entitled to holiday pay as a temp construction worker?

Yes — all workers, including those on CIS, accrue statutory holiday pay (5.6 weeks per year based on average earnings under the Working Time Regulations). Most agencies calculate and hold holiday pay in a 'rolled up' arrangement, paid as an additional percentage on top of your day rate (typically 12.07% of gross pay). Confirm how your agency handles holiday pay when you register — some include it in the quoted rate, others show it separately.

What expenses can I claim as a self-employed CIS construction worker?

Self-employed CIS workers can typically claim: tools and equipment purchased for work, PPE (personal protective equipment), safety boots, workwear, vehicle mileage for travel to temporary workplaces (not your permanent place of work), professional subscriptions (CSCS renewal, trade body membership), and a portion of mobile phone costs if used for work. Keep receipts for all expenses. Consult an accountant familiar with construction industry tax — the investment typically pays for itself.

Pay & Payroll Guide

How Construction Agency Payroll Works

CIS, PAYE, umbrella companies, timesheets, holiday pay — this guide explains how construction agency pay works in plain English so you know exactly what to expect.

Quick Answer

How does construction agency payroll work?

Construction agency payroll works in one of three ways: CIS (Construction Industry Scheme) — for self-employed workers, 20% tax deducted at source by the agency, remainder paid weekly; PAYE — employed by the agency with tax and NI deducted automatically, includes holiday pay accrual; or Umbrella company — a third-party employer that employs you under PAYE, deducting their margin plus tax. Workers submit timesheets weekly for client approval, and most agencies process payment via BACS on a Friday.

Three Ways Construction Agencies Pay Workers

Each payment method suits different circumstances. Understanding the differences helps you choose the right arrangement for your situation.

CIS

PAYE

Employed by agency

Pay As You Earn

Agency is your employer
Tax, NI, pension deducted automatically
Holiday pay accrued (5.6 weeks/year)
Employment rights protected
Lower take-home than CIS on same gross
No self-assessment required

Best for: workers who want simplicity and employment rights, or those on longer-term placements.

Umbrella

Third-party employer

Umbrella Company

Umbrella company is your employer
Agency pays umbrella; umbrella pays you
PAYE with umbrella margin deducted
Typically £15–£30/week umbrella fee
Employment rights via umbrella
Avoid loan/contractor scheme variants

Best for: workers who want PAYE status but work across multiple agencies, or those in some IR35-affected roles.

Warning: avoid any umbrella arrangement promising unusually high take-home via loan or contractor schemes — HMRC actively pursues these.

How Timesheets and Payment Work

Understanding the timesheet-to-payment cycle avoids delays and ensures you get paid correctly every week.

Submit your timesheet

Log your hours via the agency's online portal or app by the agreed weekly cut-off — usually Friday lunchtime or end of business. Include your daily hours, any additional work (nights, weekends), and allowances.

Client approval

The agency requires sign-off from your site manager, supervisor, or client representative before processing payment. Ensure you get approval promptly — unsigned timesheets cause delays. Most agencies send automatic approval reminders.

Payroll processing

Once approved, the agency processes your timesheet. For CIS workers, 20% tax is deducted at source. For PAYE workers, full tax and NI deductions apply. Holiday pay is either included in your rate or paid separately depending on your arrangement.

BACS payment

Payment is made via BACS bank transfer — typically to your account on Friday (or Monday if processed late). You receive a payslip or remittance showing gross pay, deductions, and net payment. CIS workers also receive a monthly CIS statement from HMRC.

Payroll FAQs for Construction Workers

Looking for Construction Work?

Phoenix Gray handles all payroll administration for workers we place — CIS, PAYE, weekly pay, and compliant timesheets via our online portal.