Umbrella vs CIS: which is appropriate for construction workers?

Construction workers can be paid through CIS or through employment, such as umbrella payroll. Which is correct depends on whether the worker is genuinely self-employed, and that turns on how the work is actually done.

The key difference

	CIS	Umbrella
Worker's status	Self-employed subcontractor	Employee of the umbrella company
Deduction	20%, 30% or 0% of labour, as an advance on tax	Income tax and National Insurance under PAYE
Holiday and sick pay	No	Yes
Tax return	Self Assessment required	Normally not needed

Why status comes first

A worker who is supervised, directed or controlled in how they work, uses the client's tools and works set hours is likely to be an employee for tax purposes, whatever the contract says. Paying them under CIS would be wrong, and the tax shortfall can be pursued later.

Signs CIS may be appropriate

The subcontractor decides how the work is done.
They provide their own tools and can send someone else.
They take financial risk, for example pricing a job and fixing mistakes at their own cost.
They work for several contractors.

Signs employment is right

A supervisor tells them how, when and where to work.
They are paid by the hour with no financial risk.
They work for one client like an employee.

We assess status before anyone is paid under CIS. See CIS payroll and umbrella payroll.

Frequently asked questions

Can every construction worker be paid under CIS?

No. CIS only applies to genuinely self-employed subcontractors doing construction work.

Is the CIS deduction the worker's final tax?

Not necessarily. It is an advance payment towards their tax and National Insurance, settled through Self Assessment.

Need help with this? Our payroll and compliance team can talk it through with you. Talk to our team.

Last reviewed 9 October 2026. General information, not legal or tax advice.