Reply to: Negotiating Employer National Insurance Contribution

[psychocandy]

Hello,

I keep having contact from recruiter telling me inside IR35 contract. None of them have a clue about the employer national insurance contribution when asked.

And often they prefer to ignore me and go to the next candidate instead of trying to get to it.

And when they do, they just say it will be managed by the umbrella company, which I told them someone needs to pay for it, and that's not going to be the umbrella.

So I'm wondering if you guys have any trick to managing these situation? Or shall I assume that any inside IR35 contract means the contract have to fork both the employer and employee national insurance contribution?

Thanks

The umbrella aint going to pay it. Neither are the agency.....

Yep you will have to fork out both so take that into account.

[eek]

Ir35 was supposed to ensure everyone paid tax fairly

And that is what the new scheme actually does but because we don't work the way other people do we don't see it.

You need to go back to the original HMRC examples where the lawyer / newsreader John was being paid the same via his limited company £50,000 as the employee Jane was being paid £50,000 (less the employer NI so probably £42,000)

Prior to IR35 John (who was claiming to be outside IR35) was way better off. Now that isn't the case and in the short term John is clearly going to be worse off.

However after 12 weeks (as John is now being paid via PAYE) pay parity rules kick in at which point he needs to be being paid £42,000 a year. And the umbrella firm needs to ensure that all their costs are covered (say £11,000) outside of John's pay so the Umbrella firm now needs to invoice the agency £53,000 rather than £50,000. And suddenly the idea of keeping people off payroll doesn't seem like such a cost saving.

As IT contractors we are usually paid way more than permanent employees - that simply isn't the case elsewhere and in those cases (Lorry Drivers is a current mare) workers have kept outside IR35 not to ensure they receive a lot more money but to ensure they receive slightly more than permanent employees while keeping actual costs little different to that of permanent employees and that is what these changes are really fixing

We are as I've been saying for the past 20 years well paid potentionally innocent people caught up in the cross fire

[mallisarealperson]

Ir35 was supposed to ensure everyone paid tax fairly

Issue here is that the end client is still not paying it's NI just a fee to an agent. Just like before when we were all ltd.

End client says to agency get me a bod to do xyz here is a day rate.

Agent says thanks takes it's cut for doing bugger all and spits out a rate to an umbrella (the rate advertised). And says to the umbrella you sort the rest out.

Umbrella spits out about 51% of this rate to the contractor.

The contractors employer is the umbrella. Not the agency or end client. (Actually I am not sure why we are called contractors anymore, really just temps).

And the NI being payed is calculated from the rate the umbrella receives not the amount payed to the agency.

So rough calc

End client (£500 per day)-> Agency (£435 per day)-> Umbrella pays contractor (About £246 per day)



Load of old b####cks

[malvolio]

Actually it is you who is confused - the agency doesn't pay your rate to the umbrella firm - it pays the Inside IR35 / Umbrella / Assignment rate to the umbrella.

It may be the rate you accepted to take the job but it's not your money (HMRC is very clear about that now) until all employment expenses have been deducted....

Like I said, I won't argue. Reality is - as you well know - the rate offered in the advert is what the agency gives to the umbrella 99% of the time, i.e. the client's payment less the agency fee. People are reading that as meaning that it is the rate they will be paid whereas their effective rate is rather less than that. And the point I was making is that you are not paying the ErNICs and AL out of your money, it was never your money in the first place. On which I think we are agreed.

I read an earlier comment as someone saying they were effectively paying the NICs out of their earnings. Maybe I misread or misunderstood a cryptic comment. It's really not worth getting all religious about it. Enough has been written about contract. assignment and smurf rates for people to know what they all mean by now.

[eek]

Umbrella has to pay the employer NI.period.

... out of your rate for the job. Pay attention.

I give up. It's not me that's confused

Actually it is you who is confused - the agency doesn't pay your rate to the umbrella firm - it pays the Inside IR35 / Umbrella / Assignment rate to the umbrella.

It may be the rate you accepted to take the job but it's not your money (HMRC is very clear about that now) until all employment expenses have been deducted....

[malvolio]

You’re confusing “the rate” with “his rate”. His rate is his, obviously.

The overall sum involved you won’t even know since the agent either won’t tell you or lies.

I give up. It's not me that's confused

[hugebrain]

No it's not.

He gets the post-taxation portion of the fee the client is paying the service provider(s) for the work to be done. The agency is the supplier, the umbrella merely a service provider to handle the boring bits, the worker is, ermm, the worker and the client is paymaster. The rate is the overall sum involved (unless you get a seriously honest agent who will tell you what part of the total is coming to you pre-employee taxes - but that makes the rate look so low nobody would apply for it).

It's not difficult to understand...

You’re confusing “the rate” with “his rate”. His rate is his, obviously.

The overall sum involved you won’t even know since the agent either won’t tell you or lies.

[malvolio]

if it’s his rate, then it’s his money, not the umbrella’s.

No it's not.

He gets the post-taxation portion of the fee the client is paying the service provider(s) for the work to be done. The agency is the supplier, the umbrella merely a service provider to handle the boring bits, the worker is, ermm, the worker and the client is paymaster. The rate is the overall sum involved (unless you get a seriously honest agent who will tell you what part of the total is coming to you pre-employee taxes - but that makes the rate look so low nobody would apply for it).

It's not difficult to understand...

[hugebrain]

... out of your rate for the job. Pay attention.

if it’s his rate, then it’s his money, not the umbrella’s.

[eek]

Yeah but I don't think we factored in agency stupidity/lies reaching new highs

Being inside IR35 only costing you 10% isn't a new high - it doesn't even start to compare to other sectors (I've seen some real classics in the temporary driver market)....

Including the 12 month light touch means you can continuing using your limited company until 2022 and we won't do deemed payments.

[ladymuck]

Plus the apprenticeship levy to pay

You avoid that by going with a mini umbrella


(joke)

[anonymouse]

Plus the apprenticeship levy to pay

[malvolio]

Umbrella has to pay the employer NI.period.

... out of your rate for the job. Pay attention.

[RobScott]

Umbrella has to pay the employer NI.period.

[northernladuk]

it's tough game now...

Yeah but I don't think we factored in agency stupidity/lies reaching new highs