Reply to: Potentially going PAYE (short term) - rate breakdown

[anonymouse]

Mine worked out at 65% of contract a couple of years ago, same details but now works out about 58%. Mentioned on another page, usual is 53-54%

[Acme Thunderer]

Hi, just got this breakdown numbers for a PAYE contract


Contractor Cost - £525.00
ERS NIC 13.80% - £61.76
Apprenticeship Levy 0.50% - £2.24
Pension 3.00% - £13.43
----------------------------------------
PAYE Rate incl Holiday - £447.57

Holiday Pay 12.07% - £48.20
----------------------------------------
Contractor PAYE Rate - £399.37



What would be my net/take home pay then? I assume it's not going to be £399.37 as I can't see any employee NI in there.

Nor does it have PAYE in there either. To give you my details I put 17.5% into pension via salary sacrifice and my take home is as close to 50% of day rate that makes no difference. I also take my Holiday Pay as part of my Take Home.

It can drift a little, if you have a week off you get an extra week of personal allowance to reduce the PAYE the next week.

[PCTNN]

Hi, just got this breakdown numbers for a PAYE contract


Contractor Cost - £525.00
ERS NIC 13.80% - £61.76
Apprenticeship Levy 0.50% - £2.24
Pension 3.00% - £13.43
----------------------------------------
PAYE Rate incl Holiday - £447.57

Holiday Pay 12.07% - £48.20
----------------------------------------
Contractor PAYE Rate - £399.37



What would be my net/take home pay then? I assume it's not going to be £399.37 as I can't see any employee NI in there.

[smileyface]

Yes - the only difference should be the fee, pension contributions and how they handle retained holiday payments.

Thanks

[eek]

If you take on a contract that is inside IR35 and therefore go through an umbrella company instead of your own ltd co, is it true the take home pay is almost identical whichever umbrella company you go with, the difference being only what fee the umbrella company charges?

Yes - the only difference should be the fee, pension contributions and how they handle retained holiday payments.

[smileyface]

If you take on a contract that is inside IR35 and therefore go through an umbrella company instead of your own ltd co, is it true the take home pay is almost identical whichever umbrella company you go with, the difference being only what fee the umbrella company charges?

[KinooOrKinog]

not trying to drive the conversation off-topic here. 100% i went in for the dosh, I also take the risk on me if a stupid pizza delivery guy on his overspeading moped rams into me whilst i am riding to work on my bike and i can't work for 2 weeks. That's what self-employment is about right? How can we make those independent decisions and take risks as we used to?

The point i am trying to make is that if we all said "NO" to this and pushed for more day rates or atleast put that on the table, maybe not in your current role as we all have to secure a role in the interim but in your next role then the market will respond accordingly.

If hiring an inside Payroll consultant is going to cost my end client extra 300-400 a day then i am sure companies, agencies will try to find contractors who can work outside for less or try make an effort to release roles for affordable prices. Makes sense?

I wholeheartedly agree with what you're saying in that if people start taking the cr*ppy rates then it just drives the market down. Some of us will be in a better position than others to hold out but unfortunately not forever. Principles don't feed your family, sadly.

[Paralytic]

If hiring an inside Payroll consultant is going to cost my end client extra 300-400 a day then i am sure companies, agencies will try to find contractors who can work outside for less or try make an effort to release roles for affordable prices. Makes sense?

Yes, it makes sense if hiring an inside Payroll consultant is going to cost your end client extra 300-400 a day but i simply don't think many people are in a position where they're not easily replaceable by another person who will work Inside at the lower rate or where the client can use cheaper offshore/onshored labour via an SI.

[messymess]

Whilst many people say this, i suspect in most cases people have gone contracting for the ££££s, but with the side-benefit of no politics, annual goals, performance reviews etc.

not trying to drive the conversation off-topic here. 100% i went in for the dosh, I also take the risk on me if a stupid pizza delivery guy on his overspeading moped rams into me whilst i am riding to work on my bike and i can't work for 2 weeks. That's what self-employment is about right? How can we make those independent decisions and take risks as we used to?

The point i am trying to make is that if we all said "NO" to this and pushed for more day rates or atleast put that on the table, maybe not in your current role as we all have to secure a role in the interim but in your next role then the market will respond accordingly.

If hiring an inside Payroll consultant is going to cost my end client extra 300-400 a day then i am sure companies, agencies will try to find contractors who can work outside for less or try make an effort to release roles for affordable prices. Makes sense?

[Paralytic]

I am a contractor because i don't like being tied into a company's culture (which mostly in all companies are a shambles anyway) and then there is the politics and the whole lot which most of you are already aware of, probably dealt with.

Whilst many people say this, i suspect in most cases people have gone contracting for the ££££s, but with the side-benefit of no politics, annual goals, performance reviews etc.

[KinooOrKinog]

I am also very surprised that people are even considering going permanent or Umbrella. I am a contractor because i don't like being tied into a company's culture (which mostly in all companies are a shambles anyway) and then there is the politics and the whole lot which most of you are already aware of, probably dealt with.

I would never go on payroll. Full Stop.

Probably because most people have mortgages & bills to pay. Never say never.

[messymess]

Bit of both. Good recruiters should understand the various engagement types and how that translates to net pay - I'm doing a LOT of training around this at the moment. But inside IR35 wasn't really a thing before this change - lots of agencies offered umbrella or limited, both the same gross rate with another entity doing deduction calcs. The requirement for KIDS (Key information Document sheet - snazzy, I know) only comes in from April and it's only for new contracts after April. So technically they don't have to give you that info now (though they absolutely should)

Broadly - the options are:

PSC - Inside IR35 - Quoted rate must be exclusive of Employer costs (ERNIC, App Levy), PAYE is processed on this rate so EENIC and Income tax are deducted at source. No holidays or pension rights.

PSC - Outside IR35 - Quoted rate is gross and tax is down to your comany structure etc. The total rate is paid to your Comapny and you do the rest.

Umbrella - IR35 does not apply (you're an employee) - Quoted contract rate is the gross amount paid to Umb which includes Employer & Employee costs. So you will have deducted from this ERNIC, App Levy, ER Pen, Hol Acc (which you get back), EENIC and Income Tax plus the umbrella fee. You may be able to offset some expenses against your gross rate and reduce the overall tax take.

PAYE - IR35 does not apply (you're a worker) - Quoted rate must be exclusive of Employer costs (ERNIC, ER Pen, App Levy, Hol Pay (which you get back)). PAYE is processed on this rate so EENIC, EEPen and Income Tax are edeucted at source.

The confusion I think is a lot of people are saying 'Inside IR35' when they mean umbrella or PAYE. That makes it difficult for you to understand what the rate constitutes. The easiest way to understand it is to ask the recruiter 'Can I work through my PSC then?' if they say no, it's not inside IR35. It's either Umbrella or PAYE.

I had a meeting last week with the current client and I was told that their working practices have been determined as "inside IR35". A review took place by a 3rd party IR35 reviewers.

I was asked if I wanted to go permanent with them but they don't pay very well. Like many others on this forum, I was asked if I would consider going Umbrella and I told them I can consider that option but not for the same day rate(to be fair it will be until I find my next outside IR35 gig). They are considering speaking to the agency if they can look at increasing my day rate.

I am wondering if the "freelancer work" will shrink post-April in the UK? I am also very surprised that people are even considering going permanent or Umbrella. I am a contractor because i don't like being tied into a company's culture (which mostly in all companies are a shambles anyway) and then there is the politics and the whole lot which most of you are already aware of, probably dealt with.

I would never go on payroll. Full Stop.

[youngguy]

Crikey, that's a lot of similar but slightly different options and agents will almost certainly mix many of these elements/definitions up.

Bring on the KIDS.

Broadly - the options are:

PSC - Inside IR35 - Quoted rate must be exclusive of Employer costs (ERNIC, App Levy), PAYE is processed on this rate so EENIC and Income tax are deducted at source. No holidays or pension rights.

PSC - Outside IR35 - Quoted rate is gross and tax is down to your comany structure etc. The total rate is paid to your Comapny and you do the rest.

Umbrella - IR35 does not apply (you're an employee) - Quoted contract rate is the gross amount paid to Umb which includes Employer & Employee costs. So you will have deducted from this ERNIC, App Levy, ER Pen, Hol Acc (which you get back), EENIC and Income Tax plus the umbrella fee. You may be able to offset some expenses against your gross rate and reduce the overall tax take.

PAYE - IR35 does not apply (you're a worker) - Quoted rate must be exclusive of Employer costs (ERNIC, ER Pen, App Levy, Hol Pay (which you get back)). PAYE is processed on this rate so EENIC, EEPen and Income Tax are edeucted at source.

[ComplianceLady]

Some I have seen today:-

Pay Rate: £500.00 (Inside IR35)
PAYE £372.50 per day + 14.54% accrued holiday + 3% pension contribution
*********
*********
Pay Rate to Candidate: £550 (Inside IR35)
PAYE £409.37 per day + 14.54% accrued holiday + 3% pension contribution
*********
*********
Pay Rate: £550 (Inside IR35)
PAYE rate: £410 per day + 12.07% accrued holiday + 3% pension contribution

On the holiday rate varying this will be based on AWR - if a perm equiv employee gets more than the statutory minimum (28 days incl Bank Hols on a 5 days week or 12.069%) the a contractor from the 13th week has to get the equiv % accrued. Many clients/agencies will match this from day 1 to save the admin.

[ComplianceLady]

Hello

An agency has a job advertised for 6 months £500 a day - Inside IR35. Prior to applying, I wanted to know the exact breakdown of this deductions and NET PAY. I was told this was not possible and to seek financial guidance. Is this just lazy agency work or are they within their rights?

Bit of both. Good recruiters should understand the various engagement types and how that translates to net pay - I'm doing a LOT of training around this at the moment. But inside IR35 wasn't really a thing before this change - lots of agencies offered umbrella or limited, both the same gross rate with another entity doing deduction calcs. The requirement for KIDS (Key information Document sheet - snazzy, I know) only comes in from April and it's only for new contracts after April. So technically they don't have to give you that info now (though they absolutely should)

Broadly - the options are:

PSC - Inside IR35 - Quoted rate must be exclusive of Employer costs (ERNIC, App Levy), PAYE is processed on this rate so EENIC and Income tax are deducted at source. No holidays or pension rights.

PSC - Outside IR35 - Quoted rate is gross and tax is down to your comany structure etc. The total rate is paid to your Comapny and you do the rest.

Umbrella - IR35 does not apply (you're an employee) - Quoted contract rate is the gross amount paid to Umb which includes Employer & Employee costs. So you will have deducted from this ERNIC, App Levy, ER Pen, Hol Acc (which you get back), EENIC and Income Tax plus the umbrella fee. You may be able to offset some expenses against your gross rate and reduce the overall tax take.

PAYE - IR35 does not apply (you're a worker) - Quoted rate must be exclusive of Employer costs (ERNIC, ER Pen, App Levy, Hol Pay (which you get back)). PAYE is processed on this rate so EENIC, EEPen and Income Tax are edeucted at source.

The confusion I think is a lot of people are saying 'Inside IR35' when they mean umbrella or PAYE. That makes it difficult for you to understand what the rate constitutes. The easiest way to understand it is to ask the recruiter 'Can I work through my PSC then?' if they say no, it's not inside IR35. It's either Umbrella or PAYE.