Is it common practice agent keeps the employer NIC savings for pension contribution?

[helger]

I am an agency worker working on an inside IR35 contract. In particular, I am using the agent's payroll.

The agreed day rate is after the deduction of apprenticeship levy and employer NIC. In other words, the agreed day rate is going through the agent's payroll for deducting employee NIC and income tax.

I was enrolled to the pension plan via automatic enrolment. From the payslip, I found that the agent keeps the employer NIC savings for pension contribution. I would like to understand if this is common practice? Can I fight for it?

The reason of my question is that I am considering contributing a large amount of money into the pension via salary sacrifice, there would be significant savings on employer NIC, which is 13.8%. I feel this saving should be either go to the pension or go through the payroll to increase my take home pay. It does not sound right for the agent to keep it. Is there any policy regarding this matter anywhere?

[northernladuk]

We get asked about employers NIC almost daily so have a ton of threads with useful answers. Have a look at the search below and have a read. I'm sure your answer is there.

If you want something more specific have a play with the keywords.

employer nic site:contractoruk.com/forums - Google Search

[eek]

This actually isn't an Employer NIC question it's actually a question of who money belongs to - and the agency is right in what they are doing.

As the OP is on Agency Payroll the only thing the agency needs to pay him is their PAYE salary as specified in the contract and appropriate pension payment (as required by law unless you opt out which given there is no monetary incentive for doing so would be mad). Any Employer NI savings they can make are theirs to keep.

That is different from an umbrella who will receive an open invoice payment from the agency and should then account for every penny within it to the worker the umbrella is employing and paying.

Which is why I've said for years:-

if you wish to maximise your take home salary and have the chance use Agency payroll

If you wish to maximise your total take from the contract using Salary Sacrifice and pensions pick an umbrella that offers Salary Sacrifice either directly into your pension scheme or via a scheme that has a zero or low transfer / exist fee.

[rootsnall]

I am an agency worker working on an inside IR35 contract. In particular, I am using the agent's payroll.

Is the agent charging you to use their payroll ? If you switch to getting paid via an umbrella you will have that extra cost. But if the umbrella do provide salary sacrifice were you will effectively get back the employer NICs. So you need to do your sums.

[eek]

Is the agent charging you to use their payroll ? If you switch to getting paid via an umbrella you will have that extra cost. But if the umbrella do provide salary sacrifice were you will effectively get back the employer NICs. So you need to do your sums.

?????

Agents can't charge for using payroll that would definitely be an illegal deduction. Large agencies will often do PAYE as it's easy enough to do and removes all risks* that the use of umbrella companies create.

* there aren't really that many but none of the companies who currently pretend check and list compliant umbrella companies have completely risk free lists (i.e. they contain companies who I know aren't always compliant).

[helger]

This actually isn't an Employer NIC question it's actually a question of who money belongs to - and the agency is right in what they are doing.

As the OP is on Agency Payroll the only thing the agency needs to pay him is their PAYE salary as specified in the contract and appropriate pension payment (as required by law unless you opt out which given there is no monetary incentive for doing so would be mad). Any Employer NI savings they can make are theirs to keep.

That is different from an umbrella who will receive an open invoice payment from the agency and should then account for every penny within it to the worker the umbrella is employing and paying.

Which is why I've said for years:-

if you wish to maximise your take home salary and have the chance use Agency payroll

If you wish to maximise your total take from the contract using Salary Sacrifice and pensions pick an umbrella that offers Salary Sacrifice either directly into your pension scheme or via a scheme that has a zero or low transfer / exist fee.

Many thanks for this detail explanation. I could understand your point. Unfortunately, an umbrella company is not allowed by the client. The client requires to use the agent's payroll, though I don't know why.

If I opt out the pension, the employer's 3% contribution of qualifying earning, i.e. £25.26 per week currently, will go through the payroll (by deducting employer NIC, apprenticeship levy, employee NIC, and income tax) to increase my take home pay. But I would lose the opportunity to tax efficiently contribute to the pension.

However, if I opt in the pension, it does not sound right for the agent to keep the savings of employer NIC and apprenticeship levy. For example, if I decide to contribute £40000 into the pension, it would be huge savings in terms of employer NIC and apprenticeship levy of £40000 x (13.8% + 0.5%) = £5720. How can the agent simply keep that?!

[eek]

Many thanks for this detail explanation. I could understand your point. Unfortunately, an umbrella company is not allowed by the client. The client requires to use the agent's payroll, though I don't know why.

If I opt out the pension, the employer's 3% contribution of qualifying earning, i.e. £25.26 per week currently, will go through the payroll (by deducting employer NIC, apprenticeship levy, employee NIC, and income tax) to increase my take home pay. But I would lose the opportunity to tax efficiently contribute to the pension.

However, if I opt in the pension, it does not sound right for the agent to keep the savings of employer NIC and apprenticeship levy. For example, if I decide to contribute £40000 into the pension, it would be huge savings in terms of employer NIC and apprenticeship levy of £40000 x (13.8% + 0.5%) = £5720. How can the agent simply keep that?!

Because as I said above it's their money that they are paying out in the employer NIC and apprenticeship levy it's not yours because it's coming from their margin.

And as I've posted here multiple times in the past - life isn't fair, deal with it.