Why am I paying Employers NI?

[ladymuck]

The building industry has had its own version of IR35 for a decade. It’s called CEST 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%

CEST? I thought it was CIS?

[eek]

CEST? I thought it was CIS?

my mistake it is CIS oops

but the rest stands, the building trade has its own scheme and it’s not the typical IR35 one

[lucyclarityumbrella]

Biggest issue, is which comes first CIS or IR35, some end clients are choosing "IR35" first, which then adds more complications to the agency who then sit within the new reverse charge VAT scheme, which the umbrella does not - causing choas!

[jamesbrown]

Biggest issue, is which comes first CIS or IR35, some end clients are choosing "IR35" first, which then adds more complications to the agency who then sit within the new reverse charge VAT scheme, which the umbrella does not - causing choas!

I think this is defined in legislation. As I recall, the Off-Payroll Working Rules (ch 10) and IR35 (ch 8) take precedence over CIS. In other words, I'm surprised this is a "big issue".

[eek]

I think this is defined in legislation. As I recall, the Off-Payroll Working Rules (ch 10) and IR35 (ch 8) take precedence over CIS. In other words, I'm surprised this is a "big issue".

Which was fine until this year when the reverse VAT scheme was introduced into the CIS legislation.

As someone has pointed out over on LinkedIn - HMRC now a group of fiefdoms none of whom are talking to each other as they implement fixes to their problems using whatever tools are available to steal from in other departments.

Hence the VAT fiefdom uses CIS to combat construction VAT fraud without realising that IR35 trumps / overrides it on the NI side of things.

[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...

Not happened yet. But it's going to have to happen.

Oops. Wrong quote...

[andymalory]

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.

Sadly this is still going on in 2023.

Contractors pay employer's NI and AL because organisations are not being advised correctly by agencies.

Two articles sum the issue up perfectly. One from IPSE and the other from RSM:

• https://www.ipse.co.uk/ipse-news/ips...s-swindle.html
• https://www.rsmuk.com/ideas-and-insi...nic-deductions

Some negotiate a higher rate to account for the above, but again, that shouldn't be the way its done. Organisations are simply being advised incorrectly.

[eek]

Sadly this is still going on in 2023.

Contractors pay employer's NI and AL because organisations are not being advised correctly by agencies.

Two articles sum the issue up perfectly. One from IPSE and the other from RSM:

• https://www.ipse.co.uk/ipse-news/ips...s-swindle.html
• https://www.rsmuk.com/ideas-and-insi...nic-deductions

Some negotiate a higher rate to account for the above, but again, that shouldn't be the way its done. Organisations are simply being advised incorrectly.

Agencies have to advertise the highest rate possible to get candidates.

to do that they use assignment fees - I.e. what the end client pays for the work (illegal but nothing that the advertising standards agency will deal with so it’s now the default).

umbrellas then deduct their costs and pay the remainder.

but you are wrong in saying that this is not to our benefit - because everyone in the chain accepts that the assignment fee is attached to the worker any part of it that goes into you pension (via salary sacrifice) will include 14.3% that otherwise would be being paid by someone as employer in and apprenticeship levy. Do that with your typical bench and the employer NI saving is going to go into the agency as extra profit.

And as I have pointed out previously on here - that basically means using an umbrella rather than agency payroll / deemed payments is a better option once you put £650 (or so) a month into a pension.

[andymalory]

Agencies have to advertise the highest rate possible to get candidates.

to do that they use assignment fees - I.e. what the end client pays for the work (illegal but nothing that the advertising standards agency will deal with so it’s now the default).

umbrellas then deduct their costs and pay the remainder.

Agreed that agencies have to advertise the highest rate to attract attention. But the assignment rate and the pay rate are not always properly described as being different.

If I have agreed a rate of pay with a client, then that is what my gross pay rate is.
If an agency is simply advertising a rate that a client has put to them, the contractor must be advised that their gross pay rate may be different.

The above two are very different scenarios.

[WTFH]

Agreed that agencies have to advertise the highest rate to attract attention. But the assignment rate and the pay rate are not always properly described as being different.

If I have agreed a rate of pay with a client, then that is what my gross pay rate is.
If an agency is simply advertising a rate that a client has put to them, the contractor must be advised that their gross pay rate may be different.

The above two are very different scenarios.

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.
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.