New to me Agency tricks...

[jatinder]

Hi all,

This is my first time looking at an inside IR35 contract...and I've had an agency send me a spreadsheet showing the differences between an inside-IR35 rate of £1k per day vs their "casual worker" scheme, which would have a day rate of £875 but they would cover the employers NI.

Strangely, the difference between £1K and £875 is almost exactly the amount of employers NI required...


Inside: At £1K inside, I'd pay PAYE/employees NI on £1K per day and then I'd pay employers NI on the £1K and I'd earn £7.8K per month net.


Casual Worker: At £875, I'd pay PAYE/employees NI on £875 and then they'd pay employers NI on the £875 and I'd earn £9.2K per month net.


Obviously, the error is that when inside, the charge rate may be £1K but the pay to the worker is approx £860 per day, the rest being used to pay employers NI.

I suspect some people would fall for this...or is my thinking incorrect?

--Jatinder

[eek]

Hi all,

This is my first time looking at an inside IR35 contract...and I've had an agency send me a spreadsheet showing the differences between an inside-IR35 rate of £1k per day vs their "casual worker" scheme, which would have a day rate of £875 but they would cover the employers NI.

Strangely, the difference between £1K and £875 is almost exactly the amount of employers NI required...


Inside: At £1K inside, I'd pay PAYE/employees NI on £1K per day and then I'd pay employers NI on the £1K and I'd earn £7.8K per month net.


Casual Worker: At £875, I'd pay PAYE/employees NI on £875 and then they'd pay employers NI on the £875 and I'd earn £9.2K per month net.


Obviously, the error is that when inside, the charge rate may be £1K but the pay to the worker is approx £860 per day, the rest being used to pay employers NI.

I suspect some people would fall for this...or is my thinking incorrect?

--Jatinder

Um that's wrong

Inside the umbrella gets £1000 deducts employer NI at 13.8% + apprenticeship levy 0.5%. That would give you a gross pay of £875 or so.

From that gross pay employee NI and then income tax would be deducted to give you your net pay.

Under their casual scheme your gross pay starts at £875. From that you then deduct employee NI and income tax to give you your net pay.

So the amounts should be identical to all intents and purposes.

The only question becomes one of whether you want to throw £40,000 or so into your pension pot as it's easier to get an umbrella to contribute their Employer NI savings into that pot via Salary Sacrifice. Agencies will likely only do a workplace pension or pocket the Employer NI savings.

[jatinder]

Yes, that's exactly what I thought...