Why am I paying Employers NI?
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    Default Why am I paying Employers NI?

    OK so I get asked this question over and over and it appears that some companies still cease to explain things properly to contractors leaving them disgruntled when they see their first payslip, so let me explain the situation in simple terms for any newbies...

    So what you need to be aware of is that:

    THE DAY RATE YOU ARE GIVEN IS YOUR CONTRACT RATE, NOT YOUR SALARY UNTIL EMPLOYERS NI, APPRENTICESHIP LEVY AND THE UMBRELLA MARGIN ARE DEDUCTED FROM THE CONTRACT RATE IE THE MONIES THEY RECIEVE FOR THE WORK UNDERTAKEN.

    All umbrella companies, as employers, have a legal obligation to pay employer's national insurance contributions and the Apprenticeship Levy (AL) to HMRC. These contributions are made from the funds received from the recruitment agency/client with whom the umbrella company will have a business to business contract; the employment costs must be paid from these funds before the salary is available to the contractor, they will also deduct their margin from the contract value.

    You will work with the umbrella company under an over-arching contract of employment and your salary will be subject to income tax and employee's national insurance contributions. Your salary is calculated as the contract value, less the umbrella company's margin, less the amount payable to HMRC for employer's NI and the AL.

    HTH
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    Default Hi Lucy

    Hi Lucy,
    let say for example I'm getting like 129 per day or like 646 pounds per week. With all the NI stuff and tax you are quoting , what should be my average pay per week
    if I claim no expenses and I pay 15 pounds for accounting and 3 pounds pension

    Ikenna

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    Quote Originally Posted by iko5000 View Post
    Hi Lucy,
    let say for example I'm getting like 129 per day or like 646 pounds per week. With all the NI stuff and tax you are quoting , what should be my average pay per week
    if I claim no expenses and I pay 15 pounds for accounting and 3 pounds pension

    Ikenna
    A quick google search brings up this calculator http://www.contractorumbrella.com/calculator.html which has a link to a calculator.

    Employer National Insurance 56.95
    Employment Tax 2.85 (apprenticeship levy in reality)..
    Employee National Insurance 49.52
    Employee Tax 69.67
    Total All Tax 179.00
    Total Net Income 450.50

    That won't be the exact figure but won't be far off.
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    Thanks Eek - do you want as job

    "if I claim no expenses and I pay 15 pounds for accounting and 3 pounds pension"

    Expenses are not allowable at source via an umbrella company anymore, our margin is slightly different to the accounting figure you mention and the pension would have to be set at the minimum contribution per week, which currently stands at a total of just over 10 per week (EEs contribution and ERs contribution). Please be aware that as of April next year the contribution percentages for pensions are due to increase, so the minimum contribution will increase to nearly 20 per week.

    HTH
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    We now offer Ltd too, so if you need a company that you can switch between Ltd & Umbrella, just shout!

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    Default Thanks EEK

    Quote Originally Posted by eek View Post
    A quick google search brings up this calculator Umbrella Company PAYE Calculator | Contractor Umbrella which has a link to a calculator.

    Employer National Insurance 56.95
    Employment Tax 2.85 (apprenticeship levy in reality)..
    Employee National Insurance 49.52
    Employee Tax 69.67
    Total All Tax 179.00
    Total Net Income 450.50

    That won't be the exact figure but won't be far off.

    Thanks Eek what I used to get was Total Net Income 446 but now I get Total Net Income 439 due to some employment cost increase.

    What I really want to know if anyone can help is better to go limited but I use a third part software endorse by the HMRC to do my tax thereby saving cost

    two if I earn a company and earn like 1k a week and pay or that in salary minus all the taxes and NI stuff leaving the company account 0 every week is that ok
    or I have leave some money in the account ?

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    Default Thanks Lucy

    Quote Originally Posted by lucycontractorumbrella View Post
    Thanks Eek - do you want as job

    "if I claim no expenses and I pay 15 pounds for accounting and 3 pounds pension"

    Expenses are not allowable at source via an umbrella company anymore, our margin is slightly different to the accounting figure you mention and the pension would have to be set at the minimum contribution per week, which currently stands at a total of just over 10 per week (EEs contribution and ERs contribution). Please be aware that as of April next year the contribution percentages for pensions are due to increase, so the minimum contribution will increase to nearly 20 per week.

    HTH
    Thanks I think the pension I pay both EE and ER is like 12 pounds . I'm just wondering if we get value for money with umbrella companies

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    Default

    Quote Originally Posted by iko5000 View Post
    Thanks I think the pension I pay both EE and ER is like 12 pounds . I'm just wondering if we get value for money with umbrella companies
    You get value for money from the service (if they are a good brolly, there are some cowboys) but you don't get tax efficiency. Make sure you don't conflate the two.
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    Quote Originally Posted by ladymuck View Post
    .....but you don't get tax efficiency.
    Unless you want to make substantial payments into the pension
    Just watching what I say

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