What gets deducted from your agency rate? Tax, NI, anything else?

[sleepyweasel]

I'm going through bbuffalo as my umbrella company, and I notice that on my monthly pay advice, they start with my total earned income (from my agency), and then deduct Tax and NI, and bbuffalo's fee, but THEN there's always a deduction for "employer expenses", and it's significant, it's about 8% of my gross income.

bbuffalo says this:
"Some employment costs are passed from the agency/client to the contractor. An umbrella company contractor's pay rate includes holiday pay and employer's NI. To cover these costs, the agency or client will normally offer a higher hourly/daily rate to umbrella company workers."

Surely this isn't my holiday pay being simply removed from my gross pay is it? if it was holiday pay, it should be going to me, if anywhere?

(confused).

[Jeebo72]

Why don't you check your terms and conditions. You did read them before you signed up?

J

[sleepyweasel]

Why don't you check your terms and conditions. You did read them before you signed up?

J

wow, bizarrely rude response.

but to answer your question yes I know my Ts and Cs and reread them once again and there is no mention of any kind of deductions.

4.1. The Contractor will receive payment from the Employment Business for an Assignment at the rate specified in the assignment confirmation note for each hour/day worked by the Contractor, plus VAT where appropriate.

4.2. Subject to any agreement by the parties to the contrary the Contractor shall not be entitled to receive payment from either the Employment Business or the Client for time not spent on Assignment whether in respect of holidays, illness or absence for any other reason.

4.3. All payments will be made to the Contractor and the Contractor shall be responsible for any PAYE Income Tax and National Insurance Contributions and any other taxes and deductions payable in respect of its Staff for any Assignment.

...

[mudskipper]

Sounds like employer's NI - you have to pay both employee's and employer's. See link

[LisaContractorUmbrella]

Hi Sleepyweasel,

It does sound as though the deduction will be for employer's NI which an umbrella company is obliged to pay as with any other employer. Under normal circumstances an employer will pay 12.8% (after allowances) of an employee's gross earnings to HMR&C. In order for an umbrella company to do this, your agency rate is adjusted to give a salary figure on which employer's NI is paid.

With regard to holiday pay - there is no guidance available to umbrella companies in this matter but it became an issue after rolled up holiday pay was declared unlawful in the EC Working Time Directives; holiday pay must now be paid seperately from earnings. Most umbrella companies will make a deduction from your salary each week/month which is then paid back to you as holiday pay at a later date. It should be noted that this is your money and if you have any unused holiday when you leave the umbrella company, or at the end of the year, it should be paid back to you in full.

[SueEllen]

wow, bizarrely rude response.

It's not a rude response.

There is a detailed thread with a sticky saying how umbrella companies work plus there are first timers guides including on this site with the same information.

You can also use the board's search facility.

I suggest you do a little research before posting if you spend a few days reading the threads on the forum it can save you months and years of hardship.