HELP, I'm new and think I have been overcharged

[centurian]

3 weeks work:

Total invoice: £3,142.85
- 199.50 parasol margin
- 295.20 employment costs (WHAT IS THIS PARASOL?)

= £2728.15
- 240.40 NI
- 396.40 tax

Net Amount: 2,091.35

I am now looking into going LTD but it sux as I was only doing some freelance between jobs and didn't want any fuss. Boy has this now turned into a fuss!!! I feel my talent has been taken advantage off. I was new to the game and I lost out hard.

I am thinking it is employers NI, because they have given you a sub-total amount - and then taken off NI + tax again from that value. That's how employers NI works. It's deducted before employees NI.

If this is true, then it means you are receiving the correct amount. This is how PAYE works. Employers NI is a hidden tax that all employees pay indirectly - they just don't see it. But when working as a contractor through an umbrella, it's rammed down your throat with every invoice.

If you had gone Ltd, you could have expected accoutancy fees of £500-1000 - more than what Parasol were deducting anyway. Ltd only makes sense for longer/multiple periods of work. Umbrella makes perfect sense for periods of a few weeks.

You haven't lost out in any way - you just haven't netted as much as you initially thought you would. However, one thing I would still be very peeved about - is why Parasol are unable to tell you what that sum is.


Edit : £240 also seems close to the correct amount of employees NI.

2728 / 3 = 909. Plug this into HMRC's NI calculator gives £83 per week

Given that employers NI is usually a bit more than employee's, £295 seems about the right figure.

[escapeUK]

You haven't lost out in any way - you just haven't netted as much as you initially thought you would. However, one thing I would still be very peeved about - is why Parasol are unable to tell you what that sum is.

Well personally I dont pay any NI at all. So paying two lots of this scam tax is kinda losing out in a big way.

He has the right idea, go limited. There's no reason not to, unless you think contracting is not for you or you arent sure.

[LisaContractorUmbrella]

I am thinking it is employers NI, because they have given you a sub-total amount - and then taken off NI + tax again from that value. That's how employers NI works. It's deducted before employees NI.

If this is true, then it means you are receiving the correct amount. This is how PAYE works. Employers NI is a hidden tax that all employees pay indirectly - they just don't see it. But when working as a contractor through an umbrella, it's rammed down your throat with every invoice.

If you had gone Ltd, you could have expected accoutancy fees of £500-1000 - more than what Parasol were deducting anyway. Ltd only makes sense for longer/multiple periods of work. Umbrella makes perfect sense for periods of a few weeks.

You haven't lost out in any way - you just haven't netted as much as you initially thought you would. However, one thing I would still be very peeved about - is why Parasol are unable to tell you what that sum is.


Edit : £240 also seems close to the correct amount of employees NI.

2728 / 3 = 909. Plug this into HMRC's NI calculator gives £83 per week

Given that employers NI is usually a bit more than employee's, £295 seems about the right figure.

Agreed Centurian - I have run the figures through our calculator and this amount would seem to equate to employer's NI. Can't comment on the 'margin' though - I thought Parasol's fees were about the same as ours but this works out as £66.50 per week so I assume something else is included in that figure

[simondolan]

It’s worth noting that pay between assignments needs to be 50% of the previous contract value (or NMW if higher) so if a contractor has not been advanced enough funds during their assignment Parasol will top this up from our own funds.

Again the reason we’ve done it this way is so that we could create a fully compliant AWR model that didn’t add additional costs to the supply chain and still means it’s attractive to a contractor who works via an umbrella company. The end clients were never going to cover this cost, and nor were the recruitment agents. Doing it this way means that it’s business as usual for everyone and we are all AWR compliant with the minimum fuss and hassle to all those involved.

Hi Steven, so to clarify, for a fee of £120 a month, you are effectively guaranteeing that every one of your contractors will be paid 50% of their last contract value between assignments, and this will be paid out of your profits? How does this stack up?

[Steven@Parasol]

Hi Steven, so to clarify, for a fee of £120 a month, you are effectively guaranteeing that every one of your contractors will be paid 50% of their last contract value between assignments, and this will be paid out of your profits? How does this stack up?

Hi Simon, no as I said earlier in the thread:

"We are making a deduction from the contractor. We do not hold on to it until they are out of assignment though, it is paid in advance and included in their regular pay. We’ve done it this way as we believe it’s better in the contractor’s bank account than in ours and the contractor can manage their own money and budget accordingly. It is also listed separately on our payslips. This is exactly the same as we have always done with holiday pay and again this is because of the feedback we received from our employees. They would rather have it in advance then us hold on to it."

When there isn't enough in the pot to cover the PBA though we will be topping it up from our own funds.

[simondolan]

Hi Simon, no as I said earlier in the thread:

"We are making a deduction from the contractor. We do not hold on to it until they are out of assignment though, it is paid in advance and included in their regular pay. We’ve done it this way as we believe it’s better in the contractor’s bank account than in ours and the contractor can manage their own money and budget accordingly. It is also listed separately on our payslips. This is exactly the same as we have always done with holiday pay and again this is because of the feedback we received from our employees. They would rather have it in advance then us hold on to it."

When there isn't enough in the pot to cover the PBA though we will be topping it up from our own funds.

Ah OK - so you advance the amount you deduct. Not sure those sorts of semantics would get around AWR, but then, it's not exactly clear at the moment is it :-)

[centurian]

Well personally I dont pay any NI at all. So paying two lots of this scam tax is kinda losing out in a big way.

He has the right idea, go limited. There's no reason not to, unless you think contracting is not for you or you arent sure.

You missed my point. If the OP intends to do this on a regular basis, then absolutely, go Ltd. Very short periods are also great for IR35.

But that's not clear from his 2 posts - he mentions it was an assignment between jobs. If this 3 week assignment is/was the limit of contracting work, then umbrella is/was clearly the best way to go. If he had gone Ltd, it would have cost even more overall.

[LisaContractorUmbrella]

You missed my point. If the OP intends to do this on a regular basis, then absolutely, go Ltd. Very short periods are also great for IR35.

But that's not clear from his 2 posts - he mentions it was an assignment between jobs. If this 3 week assignment is/was the limit of contracting work, then umbrella is/was clearly the best way to go. If he had gone Ltd, it would have cost even more overall.

Absolutely centurian, it makes no sense setting up and then shutting down a Ltd co for what you know will be a short assignment. I would also say that any newbie should make sure that they actually like the contractor way of life before making the decision to go Ltd regardless of the length of contract offered - it's not for everyone

[GeorgeD]

Parasol Employment Costs

The old Parasol payslip had the items
Parasol Administration ann Employers NI
these are now
Parasol Margin and Employment costs

I just can' t work out the Employment costs on my Payslip and at the moment I believe I have been overcharged by about £160.

Steven@Parasol if you read this can I take you up on the offer you made in your post (20th October 2011 10:09) "to go through this in more detail".

I've had the the calculation explanation in that post emailed to me twice, but I can't equate it to the Employment Costs in my payslip (and shouldn't the calculation be 13.8/100 anyway?).
Your post also says
"but they also include amounts to cover your insurance costs, as well as enough funds in order to pay you should you be on sick leave or maternity leave etc."

I can only assume theses are new charges, as they never showed up before or were included in the Parasol Administration fee (as it was then)

If so, can you just introduce new charges like that with out any notification? isn't that a change to the contract?

If your currently with Parasol could you check your Payslips and see if it adds up
If your thinking about joining Parasol, please use their Pay Calculator and make sure you understand the Employment Costs

[prozak]

Absolutely centurian, it makes no sense setting up and then shutting down a Ltd co for what you know will be a short assignment. I would also say that any newbie should make sure that they actually like the contractor way of life before making the decision to go Ltd regardless of the length of contract offered - it's not for everyone

Lisa,

how does it not make sense?

setup costs are negligible.

1 month at 500 a day and you are already financially better off as Ltd Co v Umbrella.

edit: if you DIY everything then less than 1 week of work and you are in front.