Why am I paying Employers NI?

[WTFH]

Hi all,

Sorry to jump in, but noticed the sticky thread and am in need of some advice.

Could anyone explain (in very simple terms) why when I try to calculate employers NIC I cant get the same figure as my umbrella does?

I am taking the gross pay (after margin and apprenticeship levy etc) and multiplying by 0.138 (for 21-22 tax year), but this is about a hundred pounds off what the umbrella states?

Could some help me understand what is happening here, as it seems similar for a few umbrellas.

Thanks in advance!

When you say it is about a hundred pounds out, is that based on daily, weekly, monthly or annual calculations?
Also, it's worth noting that we are currently in the 23-24 tax year if you're trying to work out using today's figures.

Rather than using words to say there's a difference, it might help if we saw numbers, or speak to the umbrella if you don't want to share actual numbers here.

[BB8]

Hi all,

Sorry to jump in, but noticed the sticky thread and am in need of some advice.

Could anyone explain (in very simple terms) why when I try to calculate employers NIC I cant get the same figure as my umbrella does?

I am taking the gross pay (after margin and apprenticeship levy etc) and multiplying by 0.138 (for 21-22 tax year), but this is about a hundred pounds off what the umbrella states?

Could some help me understand what is happening here, as it seems similar for a few umbrellas.

Thanks in advance!

[andymalory]

It's crazy that you think like that.

The agent or end client do not determine how much an umbrella charges, or if you're going via your own Ltd, bow much you pay yourself as a salary.

The agent or client will offer the amount that they are prepared to pay. That is what matters to them - how much it will cost them to get you on board. They are not your financial advisers. They do not care if you have 20 layers between you and them. They do not care if you pump a load of money into a pension. They do not care about who all takes a cut before it hits your bank.

Who takes a cut, and how much they take - those are things you should care about. It's crazy that you want to absolve yourself of any personal responsibility.

This is not about personal responsibility. I'm not talking about what contractors do once they've been paid a gross salary - i.e. through a Ltd or what I put in a pension. That is not relevant to this. For a salaried individual at £25k, they don't want or need to know that the employer actually has budgeted higher than this for their employer costs.

Why is an inside-IR35 contractor, who is employed for tax purposes, treated any differently?

[WTFH]

Its crazy to say contractors should be trying to figure out how to include other (non-worker) costs in the rates being negotiated.

In no other client-staff situation would this ever be considered reasonable, but somehow contractors and freelancers have to now think about this.

It's crazy that you think like that.

The agent or end client do not determine how much an umbrella charges, or if you're going via your own Ltd, bow much you pay yourself as a salary.

The agent or client will offer the amount that they are prepared to pay. That is what matters to them - how much it will cost them to get you on board. They are not your financial advisers. They do not care if you have 20 layers between you and them. They do not care if you pump a load of money into a pension. They do not care about who all takes a cut before it hits your bank.

Who takes a cut, and how much they take - those are things you should care about. It's crazy that you want to absolve yourself of any personal responsibility.

[andymalory]

And who are you negotiating that with?
The people that pay you, or some agency or client that pays them?

If you're not negotiating it with the people who pay money into your personal bank account, then it's up to YOU to include their part in your sums. Not anyone else.

Usually the end client or agency. Its crazy to say contractors should be trying to figure out how to include other (non-worker) costs in the rates being negotiated.

In no other client-staff situation would this ever be considered reasonable, but somehow contractors and freelancers have to now think about this.

[andymalory]

Are you an employee of the company you are negotiating with?

if not, you aren’t dealing with the company’s HR department so everyone except for you is looking at the project budget and going - yep we can afford to give the agency £x a day for that skill set (because that is what they are working from).

And your mistake is that no-one except you thought this is as anything beyond a high level budgetary item.

No I am not an employee. But again, if a prospective permanent staffer were negotiating, they would be in exactly the same position. Both sides should only ever be negotiating the pay rate for the employee or worker.

The chaos that ensued when off-payroll rules came into effect in 2017/21, meant that everyone was more concerned with how to best make the inside/outside determination, rather than figuring out how employer costs should be budgeted for if any contractor was deemed inside IR35.

Now we are in a crazy situation where contractors will try and negotiate higher rates to mitigate the employer costs, and if accepted the client pays anyway! Just via a convoluted route!

[andymalory]

The contractor's pay will be different depending on how the contractor is paid. So, when you say "gross pay rate", you need to define what you mean by that. And you need to confirm that others agree with you.

Absolutely, though the onus is equally on the client to ensure they are being clear what rate they are offering. This should be in the KID, but even that isn't always clear.

An agency does not dictate how much margin an umbrella makes from a role. So the "gross pay rate" coming out of the agency is not something that becomes the contractor's gross pay.

And also, and advertised rate is just an advertised rate, it's not a guarantee that anyone, irrespective of skills or experience, will get the same rate.
...and any employment tribunal will throw you out if that is your argument against an agent.

Agree with both points.

[eek]

Why would I negotiate the budgetary cost? How many employees negotiate the budgetary cost?

I negotiate my rate of pay

Are you an employee of the company you are negotiating with?

if not, you aren’t dealing with the company’s HR department so everyone except for you is looking at the project budget and going - yep we can afford to give the agency £x a day for that skill set (because that is what they are working from).

And your mistake is that no-one except you thought this is as anything beyond a high level budgetary item.

[WTFH]

Why would I negotiate the budgetary cost? How many employees negotiate the budgetary cost?

I negotiate my rate of pay

And who are you negotiating that with?
The people that pay you, or some agency or client that pays them?

If you're not negotiating it with the people who pay money into your personal bank account, then it's up to YOU to include their part in your sums. Not anyone else.

[andymalory]

Is it? - did you specify to everyone that you were negotiating a PAYE rate or simply the budgetary cost of you being there for y days at £x a day as a cost to the project.

because I bet everyone on the other side of the desk was working on the assumption that this will take £x a day from he overall project budget with no attention paid to the employment costs because that’s a complete different department and gets complex quickly.

Why would I negotiate the budgetary cost? How many employees negotiate the budgetary cost?

I negotiate my rate of pay