Offer - inside IR35 question

[CompoundOverload]

I've just been offered a 12 month contract with a new client, which has the potential to go further (remains to be seen)...

This was through an agency, who I negotiated a slightly higher rate with (as was in an outside gig previously). The agency have said the payroll is done via them, so I asked them for a break down of the pay. They've advised there is no levy or fees to pay them and I get a "premium" day rate of X and a % of that is held back to cover holiday pay (if I don't take holiday, I just keep the cash that has been banked). Is this normal? I have also asked them for a KID which hopefully gives more information on this.

Can anyone verify if this is correct? I've reached out to my accountant for a sense check on this but waiting for a response, so thought I'd ask a loads of strangers on an internet forum.

TIA!

[ladymuck]

Agency doing the payroll isn't an issue, it's what was historically done for all temps in the olden days. Not sure what is meant by 'premium' though.

A percentage held back for holiday pay is normal and a legal requirement.

Make sure you get an illustration based on your tax code and check you're not getting ErNI deducted from the agreed rate before you sign anything. You should only be paying EeNI and PAYE. If they want to deduct ErNI then you'll be wanting an uplift to cover it.

Oh and make sure you know the rules in the contract around holiday pay. Many horror stories about it being retained if not claimed either during the contract or within a short period once it finishes. Don't risk losing out because you forgot about it.

[eek]

Sorry but that makes no sense

Agency payroll should be PAYE which means the rate being advertised so be after holiday pay and Employer NI has been deducted. Holiday pay is in addition to the rate and there is no such thing as "premium" pay rate.

[CompoundOverload]

How it was presented to me was the following:


Basic: £556.02 per day
Premium: £650

The premium is the actual day rate itself (inclusive of the holiday pay) and the basic is the amount after the holiday has been taken out (which I'm clearing having to pay myself).

When I asked if the holiday pay could be included in the normal day rate and not get paid for holidays taken, they explained that couldn't happen due to the AWR legislation.

[vetran]

How it was presented to me was the following:


Basic: £556.02 per day
Premium: £650

The premium is the actual day rate itself (inclusive of the holiday pay) and the basic is the amount after the holiday has been taken out (which I'm clearing having to pay myself).

When I asked if the holiday pay could be included in the normal day rate and not get paid for holidays taken, they explained that couldn't happen due to the AWR legislation.

OK so they are taking £100 a day to pay you £560 a day holiday pay. Is every sixth day going to be Holiday?

[Scoobos]

The whole situation this year with IR35 and agency provided payroll is illegal imo.

No matter how they phrase it , you are paying Employers NI as an employee - if the daily rate you are given is then subject to these deductions after payment.

(I'm not a solicitor, so stand to be corrected)

[malvolio]

The whole situation this year with IR35 and agency provided payroll is illegal imo.

No matter how they phrase it , you are paying Employers NI as an employee - if the daily rate you are given is then subject to these deductions after payment.

(I'm not a solicitor, so stand to be corrected)

So stand corrected. The fee from the client includes all the necessary overheads for the engagement or, to put it another way, that initial fee will be reduced by the statutory and commercial deductions in the supply chain - holiday pay, agency fee, NICs (both), PAYE, AL if applicable) and umbrella fees included. The worker is not paying anything from post-tax income and Employer's NIC has been taken out before his taxable income is calculated and necessary deductions made.

OK, there are subtleties but that is the basic position. It's as well we understand it.

[CompoundOverload]

OK so they are taking £100 a day to pay you £560 a day holiday pay. Is every sixth day going to be Holiday?

They said the deduction goes into a pot that I take from whenever I take annual leave or if I don't then the pot is then given back to me.

[vetran]

They said the deduction goes into a pot that I take from whenever I take annual leave or if I don't then the pot is then given back to me.

If that is so and its a personal pot it then seems reasonable. Need to return the pot at the end of your financial year.

[Scoobos]

So stand corrected. The fee from the client includes all the necessary overheads for the engagement or, to put it another way, that initial fee will be reduced by the statutory and commercial deductions in the supply chain - holiday pay, agency fee, NICs (both), PAYE, AL if applicable) and umbrella fees included. The worker is not paying anything from post-tax income and Employer's NIC has been taken out before his taxable income is calculated and necessary deductions made.

OK, there are subtleties but that is the basic position. It's as well we understand it.

Thanks Malvolio,

That wasn't my experience, I was quoted a daily rate which was GROSS of those deductions, therefore I was paying it , in my view. My accountant seems to agree also, they said that the daily rate should be NET of Employers NI and agency fees.