Legality of client/umbrella passing on employers NI rise

[eek]

Thanks Zeeshan, and what about the last part of my post? This really is the essence of my question..

Your last quote says it wouldn't be lawful but what law are you referring to?

[mharris]

Your last quote says it wouldn't be lawful but what law are you referring to?

To be honest I do not know and do not know where I would even look up such a thing. I am only using the terminology from HMRC that I linked (which admittedly we agreed isn't directly relevant).

You seem to be implying that it is lawful for an employer to pass off their tax obligations to the employee and reduce their gross income?

[eek]

To be honest I do not know and do not know where I would even look up such a thing. I am only using the terminology from HMRC that I linked (which admittedly we agreed isn't directly relevant).

You seem to be implying that it is lawful for an employer to pass off their tax obligations to the employee and reduce their gross income?

No I'm saying its perfectly legal for an employer to only continue giving you work if you accept a pay cut.

And I previously pointed out that the Key Information Document will have shown that the agency assignment rate that the agency advertised includes all employer employment costs. Now I would have expected a new Key Information Document to have been issued because of the changes in NI are to me a new deduction because the rate is different but you can see why some people may feel different.

[mharris]

Hi mharris

As you've mentioned, those rules deal with PSCs being paid by a fee-payer (generally the recruitment agency). There is no 'fee payer' or PSC in the umbrella supply chain (worker > umbrella > agency > client), and the off-payroll working rules don't impose a fee payer into supply chain either, so these rules wouldn't apply.


Kind regards

Zeeshan

Zeeshan, your assertion that there is no 'fee payer' is somewhat contradicted by this article (see the section titled: Can umbrella companies deduct employer’s NI lawfully?)

It isn't the most reliable of websites, but does the content of that section align with your understanding at all?

[mharris]

No I'm saying its perfectly legal for an employer to only continue giving you work if you accept a pay cut

I think that is dubious, bordering on being completely wrong.
The contract can only be terminated due to the clauses specified in the contract.
"We reserve the right to terminate this contract if you refuse to accepted a pay cut" does not appear in my contract.

Now there are plenty of fairly general clauses that a client can use to wiggle out of a contract but that is beside the point from a legal point of view.

[DolanContractorGroup]

Zeeshan, your assertion that there is no 'fee payer' is somewhat contradicted by this article (see the section titled: Can umbrella companies deduct employer’s NI lawfully?)

It isn't the most reliable of websites, but does the content of that section align with your understanding at all?

Hi mharris,

It's not the clearest of articles, in my opinion. It talks about 'deemed employment payments' to PSCs and fee payers higher up in the article, and then it talks about compliant and non-compliant umbrellas at the bottom, with no mention of fee payers in the umbrella sections.

The bottom line is this, unless you're a PSC being paid inside-IR35, a fee payer situation isn't relevant. Further, the employment costs (employers NI, app levy, etc) do not form part of your pay, they are part of the umbrella's income. If you have a look at your employment contract, it will have some variation of you being paid NMW for all hours worked, and a discretionary bonus (which is paid at all times unless the rate is on the NMW border). That is your pay.

Hope this helps.

Thanks


Zeeshan

[eek]

Hi mharris,

It's not the clearest of articles, in my opinion. It talks about 'deemed employment payments' to PSCs and fee payers higher up in the article, and then it talks about compliant and non-compliant umbrellas at the bottom, with no mention of fee payers in the umbrella sections.

The bottom line is this, unless you're a PSC being paid inside-IR35, a fee payer situation isn't relevant. Further, the employment costs (employers NI, app levy, etc) do not form part of your pay, they are part of the umbrella's income. If you have a look at your employment contract, it will have some variation of you being paid NMW for all hours worked, and a discretionary bonus (which is paid at all times unless the rate is on the NMW border). That is your pay.

Hope this helps.

Thanks


Zeeshan

I was literally about to say the same - the pay of a worker is NMW (National Minimum Wage) or whatever variation the umbrella uses plus a discretionary bonus - which should be the difference between the NMW and the after employment cost figure.

[WTFH]

I think that is dubious, bordering on being completely wrong.
The contract can only be terminated due to the clauses specified in the contract.
"We reserve the right to terminate this contract if you refuse to accepted a pay cut" does not appear in my contract.

Now there are plenty of fairly general clauses that a client can use to wiggle out of a contract but that is beside the point from a legal point of view.

I'm wondering if you're actually cut out to be a contractor. Your questions/comments are all around "Is it legal" and "It must be wrong", but not understanding that businesses are operating in legal ways.

The umbrella are not forcing you to "accept a pay cut", the government is taking more of the money charged to the client.
Remember, the fee charged to the client has not gone up, but the government are taking a bigger chunk out of that before it gets to your bank account.
It doesn't matter whether you are through your own Ltd, working via an umbrella, inside, outside, shake-it-all-about side, the government are taking more money between what the client pays and what hits your personal bank account.

Is it illegal/dubious/completely wrong? No.
Is the government morally corrupt and hell-bent on screwing over individuals and small businesses? That's a different question.

[eek]

I'm wondering if you're actually cut out to be a contractor. Your questions/comments are all around "Is it legal" and "It must be wrong", but not understanding that businesses are operating in legal ways.

I can just about see where he is coming from but the reality is that all these items have been covered multiple times by employment tribunals. I must remember to find and bookmark the tribunal between a lawyer (versus an umbrella firm) trying to setup a precedent for employer NI - the tribunal saw straight through his attempts..

[SimonMac]

I think that is dubious, bordering on being completely wrong.
The contract can only be terminated due to the clauses specified in the contract.
"We reserve the right to terminate this contract if you refuse to accepted a pay cut" does not appear in my contract.

Now there are plenty of fairly general clauses that a client can use to wiggle out of a contract but that is beside the point from a legal point of view.

Your contract will say deduction of employment costs, it won't specify an amount, this is not changing, employment costs will still be deducted.

If the changes were in your favour and your personal allowances goes from £12580 to £15000, would you be issued a new contract?