Reply to: Employers NI, In or Out of rate?

[malvolio]

Day Rate is the rate to the employer. Same as it has always been.

No it's not. We see the rate to us after the agency portion. A permie costs the employer about double their salary.

[eek]

Day Rate is the rate to the employer. Same as it has always been.

The issue is that it shouldn't be - the rate displayed should reflect the rate you receive as an employee (i.e. after Employer NI has been deducted).

David Chaplin calls it a Smurf rate as it's something that makes serious sense but allows a whole world of crap dodgy firms to promise more than what the person actually gets.

[Alf W]

Day Rate is the rate to the employer. Same as it has always been.

[malvolio]

It doesn’t for permie jobs. So why should it for contractors?

If you don't understand that, then YANCOTBAC....

A permie take home will be dependant on student loans and tax code. A contractor rate is a little more complex. You need to find out at point of application. Just like a permie does.

A permie is not entering into a business transaction, merely settling a comfort factor as part of their potential employment. A contractor is supposed to be agreeing a price for a specific piece of work..

[Lance]

the ad should simply state what you get paid.

It doesn’t for permie jobs. So why should it for contractors?
A permie take home will be dependant on student loans and tax code. A contractor rate is a little more complex. You need to find out at point of application. Just like a permie does.

[fidot]

Most likely that’s what I’m going to do long term. At least I get three months salary as a redundancy package

And that's tax free so should last more
than 3 months

[MarkT]

No idea what the perm market is in your skillset but it is possible that you'll be able to find a perm job which offers similar money to umbrella at which point I'd just go perm and enjoy all the benefits (and most likely MVL the ltd).

Most likely that’s what I’m going to do long term. At least I get three months salary as a redundancy package

[MarkT]

you will get 57% net with umbrella

I wish. Looks more like 50% from my workings. Guess it depends on the day rate.

[Andy2]

you will get 57% net with umbrella

[dsc]

Yeah that makes sense - trying to work out my take home pay from a contract via an umbrella is a bloody nightmare.

No idea what the perm market is in your skillset but it is possible that you'll be able to find a perm job which offers similar money to umbrella at which point I'd just go perm and enjoy all the benefits (and most likely MVL the ltd).

[dsc]

Actually it does. They should be advertising the rate to the worker from which Employee NICs and PAYE and holiday pay will be deducted (by them or the agency or umbrella). Employer's NICs and Apprentice Levy are the client's costs and not part of the worker's income at all.

Falsely advertising the gross rate (i.e. before all deductions) is what Dave Chaplin has called the smurf rate - attractive but doesn't actually exist. It is also illegal under Section 10 if ITEPA. Even applying GoT's rule of thumb above doesn't work if you don't know the starting point.

But then again, we are talking about agencies here. Truth is a variable concept...

Surely that is done on purpose so that someone says yes without asking questions like inside / outside, ltd / umbrella and just starts, then realises (or not perhaps) that there's way less money and it goes into their personal account rather than business account, has a re-think, sees the crap market state and just carries on?

As for Employer's NIC being part of client costs, I'm sure we can all agree that the rate will simply be reduced by (accidentally) the same amount as Employer's NIC - so technically not deducted from the rate, it's just that the real rate will be a lower rate. I agree of course that the ad should simply state what you get paid.

[MarkT]

Back then all of those public sector contractors could just leave and go work in the private sector, which is the main reason they had rate bump ups (after threatening to walk). With the private sector going through reforms now, there's nowhere to run, especially in the current market, so expect to take it on the chin or stay on the bench.

Yeah that makes sense - trying to work out my take home pay from a contract via an umbrella is a bloody nightmare.

[MarkT]

What does the key information document the agency should have given you say?

I am asking in principle, I am being made redundant and will go back to contracting, sadly inside, probably in November or January.

[malvolio]

Isn't it illegal to deduct employers NI from the rate? Not that it matters of course as they will simply say the rate is advertised rate - employers NI...

Actually it does. They should be advertising the rate to the worker from which Employee NICs and PAYE and holiday pay will be deducted (by them or the agency or umbrella). Employer's NICs and Apprentice Levy are the client's costs and not part of the worker's income at all.

Falsely advertising the gross rate (i.e. before all deductions) is what Dave Chaplin has called the smurf rate - attractive but doesn't actually exist. It is also illegal under Section 10 if ITEPA. Even applying GoT's rule of thumb above doesn't work if you don't know the starting point.

But then again, we are talking about agencies here. Truth is a variable concept...

[dsc]

I’ve spoken to a few friends who work in the public sector saying their rates were bumped up when the changes were made there a few years ago to cover that, so the chances are that public sector roles have the NI covered by the employer outside of the rate?

Back then all of those public sector contractors could just leave and go work in the private sector, which is the main reason they had rate bump ups (after threatening to walk). With the private sector going through reforms now, there's nowhere to run, especially in the current market, so expect to take it on the chin or stay on the bench.