Agency rates are higher. But direct engagement includes NHS pension. When you compare the total package — rate, pension, tax relief, and flexibility — the answer isn’t always what you expect.
This table compares the two engagement models across every factor that affects your income, pension, and working life as a locum doctor.
| Agency Locum | Direct Engagement | |
|---|---|---|
| Headline rate | £75–£120/hour (typically 10–25% higher) | £60–£95/hour |
| NHS pension access | Only if agency has framework agreement (many don’t) | Almost always included. 23.7% employer contribution on top of your pay. |
| Employer pension value (on £100k) | £0 (if no framework) or £23,700 | £23,700 guaranteed |
| IR35 status | Almost always inside IR35. Agency is fee-payer. | Almost always inside IR35. Trust deducts tax/NICs. |
| Tax treatment | PAYE via agency. Tax + NICs deducted at source. | PAYE via trust. Tax + NICs deducted at source. |
| Expenses | Limited (inside IR35). Travel may not qualify. | Limited (inside IR35). Same restrictions apply. |
| Rate negotiation | Agency sets rate. Limited negotiation. | Negotiate directly with trust. More flexibility for hard-to-fill shifts. |
| Payment speed | Typically weekly or fortnightly | Monthly via trust payroll (can be slower) |
| Shift availability | Access to multiple trusts via one agency. Wide choice. | Must register with each trust individually. More admin. |
| Admin burden | Agency handles compliance, onboarding, timesheets | You handle registration, occupational health, DBS at each trust |
| Type 2 pension forms | Agency may or may not submit on your behalf | You submit directly to the trust — full control |
| Continuity of work | Ad hoc shifts. Less predictability. | Often longer-term placements. More stability. |
| Annual leave / sick pay | None (unless umbrella) | None (self-employed engagement) |
| Total package value (on £100k) | £100,000 (no pension) or £123,700 (with pension) | £123,700 (rate + 23.7% employer pension) |
Dr Reeves is an A&E locum offered the same shifts at two rates:
The agency option pays £13,900 more in take-home cash. But the direct option delivers £14,928 more in total package value when you include the employer pension contribution. The pension money is deferred (you receive it at retirement), but it is a guaranteed, inflation-linked benefit worth £34,128 per year in employer contributions alone. Use our tax calculator to model your own numbers.
The 23.7% employer contribution is the single biggest factor in the agency vs direct decision. Here is what it means in real terms at different income levels:
| Annual Pensionable Pay | Agency (No Pension) | Direct (With Pension) |
|---|---|---|
| £60,000 | Employer pension: £0 | Employer pension: £14,220/year |
| £80,000 | Employer pension: £0 | Employer pension: £18,960/year |
| £100,000 | Employer pension: £0 | Employer pension: £23,700/year |
| £120,000 | Employer pension: £0 | Employer pension: £28,440/year |
| £150,000 | Employer pension: £0 | Employer pension: £35,550/year |
Your employee pension contributions also receive full income tax relief, reducing your taxable income. For a doctor earning £120,000 paying 12.5% pension (£15,000), the tax saving at 40% is £6,000 per year. Pension contributions also reduce your adjusted net income, helping you avoid the £100k personal allowance trap.
However, high pension growth can trigger the annual allowance tax charge if your pension input amount exceeds £60,000 (or your tapered allowance). Use the annual allowance calculator to check your position.
“Do you operate under an NHS pension framework agreement?” If the answer is yes, the gap between agency and direct engagement narrows significantly because you get pension access at both. If the answer is no — which is common — the direct engagement option includes an employer contribution worth 24% of your pay that the agency option does not.
Many experienced locum doctors combine both models to optimise their total package:
This approach is particularly effective for doctors earning £80,000–£130,000 who want pension growth but don’t want to breach the annual allowance.
Dr Torres earns £80,000 via direct engagement (with pension, Type 2 submitted, checklist followed) and £40,000 via agency shifts (no pension). Her pension input amount stays comfortably within the £60,000 allowance, while her total gross income is £120,000 — with £18,960 in employer pension on the direct portion. Best of both worlds.
Some locum doctors consider working through a personal limited company instead of agency or direct engagement. Here is how it compares:
| Agency / Direct (PAYE) | Limited Company | |
|---|---|---|
| IR35 status | Typically inside IR35 | Must be assessed per engagement. Inside IR35 = same as PAYE. |
| Tax efficiency | Standard PAYE rates | If outside IR35: salary + dividends = significant saving. If inside: minimal benefit. |
| NHS pension | Available via Type 2 | Generally NOT available for Ltd company engagements |
| Admin | Minimal | Company accounts, Corporation Tax, VAT, payroll, Companies House filings |
| Best for | Doctors wanting pension + simplicity | Doctors with >50% outside IR35 + private practice income |
For most locum doctors where the majority of work is inside IR35, a limited company adds complexity without significant tax benefit. Read our scenario guides for detailed worked examples.
It depends on the total package. Agency rates are higher, but direct engagement usually includes NHS pension (23.7% employer contribution). On £100,000, the pension alone is worth £23,700/year — often more than the rate premium.
Only if the agency has an NHS pension framework agreement. Many don't. Always ask before accepting shifts.
Yes. Many doctors use direct engagement for pension continuity (2–3 days/week) and agency shifts for top-up cash (1–2 days/week). Submit Type 2 forms for every direct engagement trust.
Both agency and direct engagement are typically inside IR35 for locum doctors. The key difference is pension access and rate negotiation, not IR35 status.
Yes. Trusts often have rate cards but there's flexibility for hard-to-fill specialties, unsocial hours, and longer placements. You can also negotiate non-rate benefits.
Only if most of your work is outside IR35. Inside IR35, a limited company adds admin cost with minimal tax benefit. You also lose NHS pension access. Read our full guide.
Kishan will compare your actual options side by side — rate, pension, tax, and total package — so you can decide with real numbers.
This comparison is for general guidance only and does not constitute tax, pension, or financial advice. Rates, pension access, and employment terms vary by agency, trust, and engagement. Always verify pension framework status directly with your agency. Tax rates are for 2026/27 unless stated otherwise. Consult a qualified Chartered Accountant for personalised advice.
Kishan Kedia ICAI, CAMS is a specialist accountant at AccTek with 20+ years of experience in locum doctor tax, NHS pension annual allowance, landlord tax, Section 24 planning and Making Tax Digital for Income Tax. He holds the ICAI qualification and is a Certified Anti-Money Laundering Specialist (CAMS).
Official guidance
For the latest HMRC and Companies House guidance, see Understanding off-payroll working (IR35). AccTek Ltd is an independent accountancy firm and is not affiliated with HMRC or GOV.UK.
AccTek is a member firm of the Institute of Certified Practising Accountants (ICPA). Our accountants have a wide range of qualifications and accreditations from trusted professional bodies such as the AAT, ICPA, and ACCA.
