Reply to: Umbrella Rate versus Day Rate

[fireseeker]

From January - so again it's out of date thanks to the Chancellor listening to HMRC and not the actual software providers.

Don't go looking for the latest one - I don't think it's out yet...

Good grief - I'm glad you're on top of this and keeping this real.

[eek]

Whoops - it is, let me get the latest one. I tried attaching the actual ODT/PDF but it was too big. Here's the 2022/23 link:

https://assets.publishing.service.go...22_to_2023.odt

From January - so again it's out of date thanks to the Chancellor listening to HMRC and not the actual software providers.

Don't go looking for the latest one - I don't think it's out yet...

[fireseeker]

That's well out of date.

I heard screams from multiple different places as the NI threshold changes that occur in July were announced - we've never had a income / NI tax change outside of at year end since computerisation occurred.

Also to see the pain involved just flick to page 7 and the rules for rounding (it's rounding but not as a computer knows it).

Whoops - it is, let me get the latest one. I tried attaching the actual ODT/PDF but it was too big. Here's the 2022/23 link:

---->>>> ANOTHER OUT OF DATE LINK - eek cheers again for spotting <<<<<-------
https://assets.publishing.service.go...22_to_2023.odt

[eek]

This is why I gave up calculating this myself in a spreadsheet... the document linked describes how software developers need to do the calcs for NICs 2022/23...

https://assets.publishing.service.go...2021_Mar20.pdf

That's well out of date.

I heard screams from multiple different places as the NI threshold changes that occur in July were announced - we've never had a income / NI tax change outside of at year end since computerisation occurred.

Also to see the pain involved just flick to page 7 and the rules for rounding (it's rounding but not as a computer knows it).

[fireseeker]

That may be what you have but it's not 100% correct (remember my point before about holiday pay legislation being a grade A mess),,

This is why I gave up calculating this myself in a spreadsheet... the document linked describes how software developers need to do the calcs for NICs 2022/23...

------->>>> IGNORE SEE 2022/23 LINK IN MY NEXT POST - thanks eek for spotting this is old <<<<<----- https://assets.publishing.service.go...2021_Mar20.pdf

[eek]

The numbers in my spreadsheet model and brolly actuals are within a few £ of each other.

Based on a review of brolly actuals …

(day rate * days worked) – umbrella margin – employer’s NI – apprentice levy – employer pension contribution = Gross Pay = (£9.50 x hours worked) + Holiday Pay + Bonus

Where £9.50 is NMW

Total pension contribution = holiday pay + bonus + employer pension contribution

Whew!

That may be what you have but it's not 100% correct (remember my point before about holiday pay legislation being a grade A mess),,

[Protagoras]

When it comes to umbrella pay - you always need to factor in holiday pay into all calculations even if you immediately return and pay it to the worker.

The numbers in my spreadsheet model and brolly actuals are within a few £ of each other.

Based on a review of brolly actuals …

(day rate * days worked) – umbrella margin – employer’s NI – apprentice levy – employer pension contribution = Gross Pay = (£9.50 * hours worked) + Holiday Pay + Bonus

Where £9.50 is NMW

Total pension contribution = holiday pay + bonus + employer pension contribution

Whew!

[eek]

I did say "I calculated this over a month, with holiday pay included in the rate"

So in my calculation I was not allowing for funds put aside for holiday pay. You've got me thinking about that one - I need to have another look at the detail of this point.

My calculation doesn't factor take-home pay, but yes, clearly employee taxes come from that.

When it comes to umbrella pay - you always need to factor in holiday pay into all calculations even if you immediately return and pay it to the worker.

Holiday pay and tricks like the one above to maximise pension contributions is a world of complete pain where half the legislation doesn't match what the other half says.

[Protagoras]

Yep it was just the way you wrote the sum but it's also still wrong

I did say "I calculated this over a month, with holiday pay included in the rate"

So in my calculation I was not allowing for funds put aside for holiday pay. You've got me thinking about that one - I need to have another look at the detail of this point.

My calculation doesn't factor take-home pay, but yes, clearly employee taxes come from that.

[eek]

Is it the way I wrote the sum? There's no deductions from pension contribution for NI etc, but they do need to be covered, don't they?

To express differently, my calculation is

Pension Contribution = (day rate * days worked) - employment costs - umbrella margin
(i.e. what's left for the brolly to put in to pension)

where employment costs = (hours worked * NMW) + employer's NI + employee's NI + PAYE taxes + apprentice levy

As an adult worker, NMW is currently £9.50 / hr

Yep it was just the way you wrote the sum but it's also still wrong

Employment costs = (hours worked * NMW) + money retained for holiday pay + employer's NI + apprenticeship levy (if appropriate).

The employee NI and PAYE taxes come out of the NMW.

Now NMW is £9.50 but you also need to factor in holiday pay at 12.07% -> £10.64 then employer NI at 15.55% will take that to about £12 or so.

[Protagoras]

That's wrong - Salary sacrifice should be everything except Umbrella margin and the amount required to pay you the minimum wage.

No Apprenticeship levy or employer NI should be coming from the pension contribution. I don't have the figure required to pay the minimum wage to hand but it's something around (and below) £12 an hour so the calculation should be

Pension Contribution = (day rate * days worked) - - Umbrella Margin - (hours worked * 12)

Is it the way I wrote the sum? There's no deductions from pension contribution for NI etc, but they do need to be covered, don't they?

To express differently, my calculation is

Pension Contribution = (day rate * days worked) - employment costs - umbrella margin
(i.e. what's left for the brolly to put in to pension)

where employment costs = (hours worked * NMW) + employer's NI + employee's NI + PAYE taxes + apprentice levy

As an adult worker, NMW is currently £9.50 / hr

[eek]

I was also unable to find such a calculator a few months ago, and ended up calculating this myself.

I also asked a couple of umbrella companies for illustrations, to verify my calculations - why not ask the umbrella company for an illustration?

I also worked it out in Excel based on

Pension Contribution = (day rate * days worked) - Apprentice Levy - Umbrella Margin - Employer's NI - Employees NI - PAYE taxes - (hours worked * NMW)

I calculated this over a month, with holiday pay included in the rate. You'd need to allow for the employee NI change in July.

That's wrong - Salary sacrifice should be everything except Umbrella margin and the amount required to pay you the minimum wage.

No Apprenticeship levy or employer NI should be coming from the pension contribution. I don't have the figure required to pay the minimum wage to hand but it's something around £12 an hour so the calculation should be

Pension Contribution = (day rate * days worked) - - Umbrella Margin - (hours worked * 12)

[eek]

Can you point me to a calculator that allows for high salary sacrifice to be entered and doesn't assume that the high level is going to continue for an entire 6 month period? Really all I want is the position for 1 month at differing salary sacrifice amounts that are 5 figures and then I can do the rest.

.

You will have to write your own in Excel. Even the payroll buddy / SafeRec one doesn't do what you want.

But the reality is you can completely ignore it. The first 4 months are simple - your salary will be £1400 or so a month due to minimum wage and the standard calculator will give you the figures for months 5 and 6 once you've hit your pension limits.

[Protagoras]

I am looking to put everything except NMW into a pension through salary sacrifice. However, I can't find an umbrella calculator online that will allow the large pension payments I am going to make.

I was also unable to find such a calculator a few months ago, and ended up calculating this myself.

I also asked a couple of umbrella companies for illustrations, to verify my calculations - why not ask the umbrella company for an illustration?

I also worked it out in Excel based on

Pension Contribution = (day rate * days worked) - Apprentice Levy - Umbrella Margin - Employer's NI - Employee's NI - PAYE taxes - (hours worked * NMW)

I calculated this over a month, with holiday pay included in the rate. You'd need to allow for the employee NI change in July.

[fireseeker]

eek Thanks for your comprehensive breakdown, that's made the position clear. Regarding the mandatory umbrella company (stipulated by the client), I'm having a solicitor check the contract to make sure I can still do other work outside client hours so I will raise this point with them.

I am looking to put everything except NMW into a pension through salary sacrifice. However, I can't find an umbrella calculator online that will allow the large pension payments I am going to make. The amount is in excess of £10000 per month, I have carry forward to use from previous tax years so I can exceed £40000 annual contribution. The calculators that allow pension to be specified and are easy to use (that I have found), Giant and Orange Genie, assume a max contribution of £40000 / 12 and won't calculate for higher than this. I am going to go max sacrifice for 4 months and then 2 months with no sacrifice - the umbrella has already confirmed they can sacrifice to my SIPP and can flex the payments through the contract.

Can you point me to a calculator that allows for high salary sacrifice to be entered and doesn't assume that the high level is going to continue for an entire 6 month period? Really all I want is the position for 1 month at differing salary sacrifice amounts that are 5 figures and then I can do the rest.

malvolio Absolutely, it's good money I just want to make sure I don't make any silly mistakes or don't ask the right questions especially as this is my first contract.