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Legality of client/umbrella passing on employers NI rise

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  • malvolio
    replied
    Originally posted by mharris View Post

    Actually, I think I understand things pretty well.

    Don't misunderstand, I haven't come here to moan or to try and launch a complaint because I think I've been scammed. Nothing here is at all unexpected. The implications for umbrella workers were immediately obvious the moment the government announced the NI increase.

    I'm simply trying to have a debate to help further my understanding and to get the opinion of others. I guess this just isn't that kind of forum..
    It is, but the older members will tend to lean on the "why don't you know that already" response, possibly unconsciously (since many people don't know that much) and it will colour their answers. In their defence, a director has a whole set of responsibilities, one of which is understanding the underlying legislation around commerce and accounting. Hence "Is it legal" is a weak opening position for a debate; usually, as in this case, it is entirely legal. Whether or not it is desirable, mutually beneficial, commercially sensible or even moral would be a better one...

    HTH

    Leave a comment:


  • mharris
    replied
    Originally posted by northernladuk View Post
    It's the standard go to for some reason. If something doesn't seem right many people just assume it's illegal just because they don't understand something. We see it on here endlessly.
    Actually, I think I understand things pretty well.

    Don't misunderstand, I haven't come here to moan or to try and launch a complaint because I think I've been scammed. Nothing here is at all unexpected. The implications for umbrella workers were immediately obvious the moment the government announced the NI increase.

    I'm simply trying to have a debate to help further my understanding and to get the opinion of others. I guess this just isn't that kind of forum..

    Leave a comment:


  • mharris
    replied
    Originally posted by DolanContractorGroup View Post
    The bottom line is this, unless you're a PSC being paid inside-IR35, a fee payer situation isn't relevant.
    I read through section 61N on the government website, nothing there states that the situation is any different with an umbrella involved in the chain. The implication being that the umbrella itsef takes the place of the intermediary, with the party directly above them being the fee payer. I think you're right though, this isn't particularly relevant to the discussion.


    Originally posted by DolanContractorGroup View Post
    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.
    Thanks for pointing this out. I hadn't considered (actually had completely forgotten) that the employment contract is for minimum wage with a discretionary bonus. This is the missing piece that gives them the scope to adjust the numbers to cover their employment costs, without actually deducting from the pay I have agreed to receive.

    Leave a comment:


  • northernladuk
    replied
    Originally posted by WTFH View Post
    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.
    It's the standard go to for some reason. If something doesn't seem right many people just assume it's illegal just because they don't understand something. We see it on here endlessly.

    Leave a comment:


  • SimonMac
    replied
    Originally posted by mharris View Post

    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?

    Leave a comment:


  • eek
    replied
    Originally posted by WTFH View Post

    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..
    Last edited by eek; 7 April 2022, 10:53.

    Leave a comment:


  • WTFH
    replied
    Originally posted by mharris View Post

    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.

    Leave a comment:


  • eek
    replied
    Originally posted by DolanContractorGroup View Post

    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.

    Leave a comment:


  • DolanContractorGroup
    replied
    Originally posted by mharris View Post

    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
    Last edited by Contractor UK; 7 July 2022, 17:17.

    Leave a comment:


  • mharris
    replied
    Originally posted by eek View Post
    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.

    Leave a comment:

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