Potentially going PAYE (short term) - rate breakdown

[ChevyChase]

Working at a large financial client - who've blanket-determined that they will no longer work with personal service companies - so all contractors have to exit the bank or go PAYE.

Not ideal of course, but needs must in the short term (would love to stick my fingers up but circumstances dictate ongoing income in the short term, no matter the risk).

Figures aren't exact - but intermediate agency will convert remainder of term of contract to PAYE. But they *must* be taking the piss:

Contract rate: £500/day + VAT
New PAYE rate: £380/day gross - i.e. before tax and NI.

I've asked for a breakdown (better bloody well get it) - but anyone here had a similar experience? What are agencies using to justify £120/day out of your rate before tax and NI is taken into account? What arguments have you used to combat them? Yadda yadda yadda.

It's boiling my piss right now.

[cojak]

Potential going PAYE (short term) - what the actual f**k!

I think that we can expect some tulippy agencies try to take advantage of the situation at the expense of contractors.

I would do whatever you did before this balls-up and avoid the agency (and let us know who it is).

If enough contractors avoid them like the plague and they get a rep for doing this, they may have to admit their ‘mistake’.

[Manic]

Working at a large financial client - who've blanket-determined that they will no longer work with personal service companies - so all contractors have to exit the bank or go PAYE.

Not ideal of course, but needs must in the short term (would love to stick my fingers up but circumstances dictate ongoing income in the short term, no matter the risk).

Figures aren't exact - but intermediate agency will convert remainder of term of contract to PAYE. But they *must* be taking the piss:

Contract rate: £500/day + VAT
New PAYE rate: £380/day gross - i.e. before tax and NI.

I've asked for a breakdown (better bloody well get it) - but anyone here had a similar experience? What are agencies using to justify £120/day out of your rate before tax and NI is taken into account? What arguments have you used to combat them? Yadda yadda yadda.

It's boiling my piss right now.

Sounds legit, you need to deduct 13.8% Employer NI then 12.07% Holiday pay. The latter of course you get back by taking the entitled days off (20+8 bank holidays).

Then you pay Tax and NI on the personal amount. It's still an almost 100k salary.

Take home works out at £253.23.

The above can be affected by pension contributions of course.

[ChevyChase]

Sounds legit, you need to deduct 13.8% Employer NI then 12.07% Holiday pay. The latter of course you get back by taking the entitled days off (20+8 bank holidays).

Then you pay Tax and NI on the personal amount. It's still an almost 100k salary.

Take home works out at £253.23.

The above can be affected by pension contributions of course.

I get with Tax & NI you go from 380 > 250 but why from 500 to > 380?

[GhostofTarbera]

I get with Tax & NI you go from 380 > 250 but why from 500 to > 380?

Because they think you are a mug and free money into there bonus


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[Acme Thunderer]

I get with Tax & NI you go from 380 > 250 but why from 500 to > 380?

Have you got a breakdown of Umbrella Income to Take Home Pay? When I got a quotation from Paystream they broke it down from Umbrella income to Gross Pay to Take Home Pay.

Umbrella income will be your day rate, they take off the Employers NI, their margin and any salary sacrifice pension contribution. If you don't salary sacrifice then you'll have to be auto-enrolled so the employers pension contribution will come out at this stage.

This then gives Gross Pay. Here the Employees NI and PAYE is deducted along with any non-salary sacrifice pension (auto-enrollment) to get you to your take home.

I think your 380 p/day is the Gross Pay.

[malvolio]

Sounds legit, you need to deduct 13.8% Employer NI then 12.07% Holiday pay. The latter of course you get back by taking the entitled days off (20+8 bank holidays).

Then you pay Tax and NI on the personal amount. It's still an almost 100k salary.

Take home works out at £253.23.

The above can be affected by pension contributions of course.

No, no, no...

The Employer's NICs are the client's problem, they are not part of your rate. You are only liable for Employee's NICs (As at now) and PAYE on you earned income. That is all laid out in Section 10 f ITEPA. don't get fooled into talking about day rate vs Engagement rate of some other weasel wording.

Of course, if you're happy to see your rate reduced by 13.8% to cover the client's costs (plus a couple more for Apprentice Levy) then go ahead. But otherwise, you should be arguing for a day rate exclusive of the client's costs.

I agree with the others though; that reduction of day rate is simply unacceptable.

[eek]

I get with Tax & NI you go from 380 > 250 but why from 500 to > 380?

I suspect it's £500
Less 13.8% Employers NI
less 0.5% Apprentice payments (unavoidable if payroll is bigger than £1.5m from memory)
less 12% holiday pay (retained and paid to your as you take you 20 days of holiday and 8 days of bank holidays)

which comes to about £120 and takes you to £380

As for whether you should be paying the Employers NI - the law says you shouldn't be paying it and it seems that you aren't - as the newly offered rate is lower to reflect the fact the company is paying it.

[cojak]

But the OP said it was £380 gross. Was he wrong about that? (It sounds about right if it was net, admittedly.)

[mudskipper]

But the OP said it was £380 gross. Was he wrong about that? (It sounds about right if it was net, admittedly.)

Gross before employee tax and NI.

The rate has been adjusted to reflect that the employee is not paying the employer NI, apprenticeship levy, holiday pay etc.

But get a breakdown to be sure.