Why am I paying Employers NI?

[lucyclarityumbrella]

OK let's take IR35 out of the question as this was not even mentioned in context to what was advertised. What was said when you were offered the role - did you have the choice as to whether to operate Ltd or Umbrella?

[Cheesus]

Hi All,

newly joined,
it is only recently i have seen and worked out i am paying the Employers NIC,

if im right, the agency advertising the role should advertise this at the amount after employers NIC is taken into account?
example: job advert shows £150 per day
this should be paid to the umbrella at say £165 to cover employer NIC and shown on the wageslip as wage uplift?

any able to clarify?

[eek]

Hi All,

newly joined,
it is only recently i have seen and worked out i am paying the Employers NIC,

if im right, the agency advertising the role should advertise this at the amount after employers NIC is taken into account?
example: job advert shows £150 per day
this should be paid to the umbrella at say £165 to cover employer NIC and shown on the wageslip as wage uplift?

any able to clarify?

Until April there are no regulations regarding how an agency should advertise rates (include employers NI to provide an umbrella rate, PAYE rate or even the estimated take home after all tax paid).

After April there is still no regulation regarding how agencies should advertise rates but they will need to provide a key facts / information document which can be found at Providing a 'Key information document' for agency workers: guidance for employment businesses - GOV.UK

At the moment I think agencies use outside IR35/ umbrella rates but I think PAYE rates will become more common. They definitely will need to be made clearer as different agencies try different methods / rates for the same contract.

[LetterBox]

Hi All,

newly joined,
it is only recently i have seen and worked out i am paying the Employers NIC,

if im right, the agency advertising the role should advertise this at the amount after employers NIC is taken into account?
example: job advert shows £150 per day
this should be paid to the umbrella at say £165 to cover employer NIC and shown on the wageslip as wage uplift?

any able to clarify?

Ah, you noticed.

Murky at present. Always best to ask the agency, if they have no idea what you're talking about, walk away. It'll become uniform soon enough as eek says, until then, insist on a breakdown.

What you'll really want to keep an eye on are PAYE rates and if given benefits are separate costs to the client or considered covered in the daily rate.

All this chat about PAYE is quite depressing, this site is turning into a knowledge base for well paid temps.

[jamessnow]

I just always thought that the advertised rates assumed that contractors would swallow the employers NI. It seems a little unfair as these large Companies avoid enough by having people operating through Umbrella's rather than employed directly by them. Maternity, sick, insurances etc etc.

[NickW]

OK so I get asked this question over and over and it appears that some companies still cease to explain things properly to contractors leaving them disgruntled when they see their first payslip, so let me explain the situation in simple terms for any newbies...

So what you need to be aware of is that:

THE DAY RATE YOU ARE GIVEN IS YOUR CONTRACT RATE, NOT YOUR SALARY UNTIL EMPLOYERS NI, APPRENTICESHIP LEVY AND THE UMBRELLA MARGIN ARE DEDUCTED FROM THE CONTRACT RATE IE THE MONIES THEY RECEIVE FOR THE WORK UNDERTAKEN.

All umbrella companies, as employers, have a legal obligation to pay employer's national insurance contributions and the Apprenticeship Levy (AL) to HMRC. These contributions are made from the funds received from the recruitment agency/client with whom the umbrella company will have a business to business contract; the employment costs must be paid from these funds before the salary is available to the contractor, they will also deduct their margin from the contract value.

You will work with the umbrella company under an over-arching contract of employment and your salary will be subject to income tax and employee's national insurance contributions. Your salary is calculated as the contract value, less the umbrella company's margin, less the amount payable to HMRC for employer's NI and the AL.

HTH

How wrong you have turned out to be! ComputerWeekly.com: IR35 reforms: Confusion over who pays employers’ NI leaves IT contractors out of pocket.
https://www.computerweekly.com/news/252498279/IR35-reforms-Confusion-over-who-pays-employers-NI-leaves-IT-contractors-out-of-pocket

[Jumper]

Really can’t see how there can be confusion and a claim against umbrella companies. Will be interesting to see how this develops but I can’t see how there is a claim.

[eek]

How wrong you have turned out to be! ComputerWeekly.com: IR35 reforms: Confusion over who pays employers’ NI leaves IT contractors out of pocket.
https://www.computerweekly.com/news/252498279/IR35-reforms-Confusion-over-who-pays-employers-NI-leaves-IT-contractors-out-of-pocket

That's a very badly written article on a topic that I've covered recently elsewhere so I'm not going to repeat here.

Basically I think there may be a case in some circumstances but unless the agency was taking kickbacks I suspect there won't be enough money to pay the amount you hope to claim.

However, if he agency has been clear that there is an uplift for using an umbrella or provided the key information document that has been required since April 2020 I believe everything has been done correctly so you won't have a chance

[Lost It]

Well I have to admit going "Umbrella" was a shock to my take home pay but I have two quotes from two different companies now. One "quotes" for 36 hours at minimum rate (which is wierd because I'm on day rate) and the other quotes for 48 hours which make a difference in take home pay of almost £50 more for some reason which makes no sense to me as there are three different tax regimes in place anyway. The "minimum wage" tax rate of zero, the intermediate tax rate of 20% and in my case the higher rate of 40% too.

But the net effect is that I "lose" about 40% off the top line. Now this is shocking... So I will be seeking a much higher base rate in future, and I think, honestly that the Building Industry is about to become very expensive...

[eek]

The building industry has had its own version of IR35 for a decade. It’s called CIS and while it changed slightly in April it won’t have a significant impact

a far bigger one is that demand for building work is through the roof so wages have increased 30-40%