Employers NI post April 2020

[ComplianceLady]

It will be interesting to see how agencies handle the advertising of inside IR35 contract vacancies and associated rates.

Currently the rate advertised is the gross rate unless agency operates PAYE, as the rate paid is to the fee payer (payroll or brolly that handles paying the contractor net of taxes) so includes NI and everything else, the rate is the rate that the client is willing to pay less the agency's cut.

Hopefully it will continue like that where the agency is offering the contract without payroll so the rate is the gross rate that needs breaking down when the fee payer determines how to deduct due taxes. Otherwise expect some confusion and mishandling by agencies that get mixed up over inside and outside IR35 contract rate handling.

It will be important to clarify exactly what the rate entails before accepting it.

I think it's unlikely you'll see Limited (Inside) rates. More likely to be a mix of Umbrella/PAYE/Limited(Outside). The requirement for Agencies to issue KIDS from next April will have an impact. This requires a breakdown on actual net pay prior to offer so will force Agencies to be clearer on PAYE + Costs for umbrella.

It's actually quite difficult to do - Employer NI (for example) varies based on overall earnings so using a blunt 13.8% on every £1 earned leaves more in the pot than is paid for ERNI.

If you advertise a gross rate as £25 inclusive of employer costs that ensures that everything that is not paid over to HMRC is paid to the contractor. If you're forced to advertise as £18 + Employer costs it means you only get £18 even in the event you opt out of pension, don't hit the LEL for ERNI etc.

[PhiltheGreek]

It will be interesting to see how agencies handle the advertising of inside IR35 contract vacancies and associated rates.

'Market' or 'Competitive' rates, one would assume?

[Hobosapien]

It will be interesting to see how agencies handle the advertising of inside IR35 contract vacancies and associated rates.

Currently the rate advertised is the gross rate unless agency operates PAYE, as the rate paid is to the fee payer (payroll or brolly that handles paying the contractor net of taxes) so includes NI and everything else, the rate is the rate that the client is willing to pay less the agency's cut.

Hopefully it will continue like that where the agency is offering the contract without payroll so the rate is the gross rate that needs breaking down when the fee payer determines how to deduct due taxes. Otherwise expect some confusion and mishandling by agencies that get mixed up over inside and outside IR35 contract rate handling.

It will be important to clarify exactly what the rate entails before accepting it.

[GhostofTarbera]

Yes.

So your saying the Employer NI actually comes out of the contractors rate

Well I never, think I said this twice in this thread


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[jamesbrown]

That's really my question, will the post April 2020, will the advertised rates drop further as the Agency now needs to withhold their fee+Employers NI?

Yes.

[BlueSharp]

Currently the rate on offer is lower for PAYE compared to Ltd company contractors, by amount equivalent to employer NICs. I would assume this will also happen with all contractors are who are caught by IR35 from April 2020. Holidays will be accrued based on additional money being withheld from the pay.

In summary, contractors will pay all PAYE taxes and any benefits based on money being deducted from wages on weekly/monthly basis.

That's really my question, will the post April 2020, will the advertised rates drop further as the Agency now needs to withhold their fee+Employers NI?

What happens with fixed term contracts today, does that rate exclude or include the Employers NI deduction?

[eazy]

Rate & Employer NICs

Currently the rate on offer is lower for PAYE compared to Ltd company contractors, by amount equivalent to employer NICs. I would assume this will also happen with all contractors are who are caught by IR35 from April 2020. Holidays will be accrued based on additional money being withheld from the pay.

In summary, contractors will pay all PAYE taxes and any benefits based on money being deducted from wages on weekly/monthly basis.

[BlueSharp]

So the agency will pay your employer NI of say £1000 a month out if it’s fee it charges the end client of £200 a month

Yes that highly likely also

Face palm

Or magic money tree

Or accept it comes out of your top line - as it will

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Why are you making numbers up to fit your argument? If the agency is liable then the end client charge will be more than £200, or the top line will reflect an amount that already covers the NI deduction. Like every other temp job...

Obviously if the agency does not put there charge up and are liable for the illegal deduction then that is their mistake and will probably go bust. My question was not targeted at your lack of commercial knowledge but what the law actually is post April 2020.

So Post April 2020:

"They cannot lawfully deduct the secondary NICs from a fee that has been agreed, but could, depending on the contractual terms, negotiate a lower fee."

If I agree the advertised fee can Employers NIC be deducted?

[GhostofTarbera]

Why would you go with an Umberella if the Agency operates PAYE and is responsible for paying Employers NI on top of the advertised rate? Sounds like an artificial scheme to push Employers NI down the chain in the post April 2020 world.

Agency x forced me to take this role and I had to be paid via an Umbrella. When I got my payslip it had illegal deduction in it....

So the agency will pay your employer NI of say £1000 a month out if it’s fee it charges the end client of £200 a month

Yes that highly likely also

Face palm

Or magic money tree

Or accept it comes out of your top line - as it will




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[BlueSharp]

So the umbrella company you will go via will pay your employer NI of say £1000 a month out if it’s fee it charges you if £30 a month

Yes that highly likely

Face palm

Or magic money tree



Sent from my iPhone using Contractor UK Forum

Why would you go with an Umberella if the Agency operates PAYE and is responsible for paying Employers NI on top of the advertised rate? Sounds like an artificial scheme to push Employers NI down the chain in the post April 2020 world.

Agency x forced me to take this role and I had to be paid via an Umbrella. When I got my payslip it had illegal deduction in it....

[GhostofTarbera]

Employers NI post April 2020

So the umbrella company you will go via will pay your employer NI of say £1000 a month out if it’s fee it charges you if £30 a month

Yes that highly likely

Face palm

Or magic money tree



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[BlueSharp]

I have seen a few comments now that it will be unlawful post April 2020 to have deductions made for Employers NI from your agreed rate. Is this true?

To quote Dave Chaplin:

"My thoughts are that the Chapter 8 rules for IR35 do not mean employers have to pay employers NI, unlike the new chapter 10 rules, which means they do."

Network Rail ‘factsheet’ indicates unlawful conduct
Under a subhead titled ‘How will IR35 affect the offer?’, the factsheet informs contractors: ‘If a role is deemed to be inside of IR35, the fee-payer will calculate Income Tax and primary (employee) National Insurance Contributions (NICs) and pay them over to HMRC. These amounts will be deducted from the agreed fee for the work provided. Network Rail have also taken the decision to deduct employer’s NICs from the agreed rate.’

This is contrary to the Off-Payroll legislation – ITEPA, Part 2, Chapter 10 - which requires that employer’s NI and the Apprenticeship Levy be paid on top of the agreed rate by the fee-payer.

Section 7 of HMRC’s guidance on applying the Off-Payroll rules offers further clarity on the matter, stating: ‘They [the fee-payer] cannot lawfully deduct the secondary NICs from a fee that has been agreed, but could, depending on the contractual terms, negotiate a lower fee.’

This fits how I was paid as a student doing temp agency worker jobs, I got the agreed rate minus employee taxes.

edit: Guidance note with statement made.

Off-payroll working in the public sector: reform of the intermediaries legislation - information for agents - GOV.UK