I am paying employers NI contributions

**stek** · 25 May 2016, 11:32

Originally posted by HarryCodLife View Post

Hi there - My Umbrella Co is ContractorUmbrella and it would appear that I am paying Employers NI contributions as well as Employees NI Contributions. On my weekly payslip under deductions is listed 'Employers NIContributions'. When I queried this with them I got the following reply: 'We have a contract in place between your Agency and Contractor Umbrella Ltd and when the funds arrive we are legally obliged to make a payment to HMRC from those money toward ERS National Insurance. As you can imagine we deduct just a small margin at the end of each week/month and if we would have to pay every contractors ERS NI we would be out of business. Once we receive the funds from the Agency the following are deducted from your Contract Value in order to lower your Tax and NI liability:

Contract Value
- Holiday
- (Expenses)
- CU Margin
- Ers (Employer National Insurance)

= Gross For Tax

I hope this makes sense however if you have any further queries please me know,

Etc, etc

Can anyone shed any light on this for me or clarify exactly what is going on here - Cheers.

Yes, you pay Employers and Employees NI. It's one of the reasons most of us go Ltd.

**northernladuk** · 25 May 2016, 11:32

Yeah. Am sure Lucy who is the MD at CU can. Give them a bell and ask for her and I am sure they will go through it with you.

**TheCyclingProgrammer** · 25 May 2016, 11:33

You are employed by your umbrella. They have to pay employers NIC. Where did you expect this to come from?

**missinggreenfields** · 25 May 2016, 11:33

Originally posted by HarryCodLife View Post

Can anyone shed any light on this for me or clarify exactly what is going on here - Cheers.

Your employer pays employers NI because they legally have to.

Your employer needs to make enough money to pay the employers national insurance.

Therefore, your employer takes that money from the amount you invoice the client, and pays it to HMRC.

The alternative model (and no-one ever does this) would be for the umbrella to have a huge charge to you and pay it out of that instead. The effect is the same (ie you are paying for it), the amount you take home is the same (because the sums are the same) but no-one does this because they you'd moan about how high the margin is without realising that the vast majority of this is national insurance.

What you are experiencing is how the business works - someone has to pay the NI.

**Old Greg** · 25 May 2016, 11:38

Let's say you have agreed a rate of £300 pd from your client. This is the total sm the client will pay for your work. They are not your employer so they do not pay Employers' NIC. As Employer's NIC must be paid, it must come out of that £300 pd. So your daily rate must cover Employer's NIC and the Umbrella fee, and after that Employee's NIC and Income tax will be deducted in the normal way. And remember that you don't get paid when you don't work, so holidays and sickness need to be covered as well.

If you've come from direct employment, it takes a little getting used to - Read up as much as you can. Start with the CUK Guides, e.g. Umbrella Company - Guides and Tips : Contractor UK

**HarryCodLife** · 25 May 2016, 11:51

Thanks for your help, I understand the process better now thanks. At least I can see that it is normal practice and that I am not being ripped off. Next time I will go Ltd, and pay for an accountant . . . - Cheers.

**northernladuk** · 25 May 2016, 11:57

Originally posted by HarryCodLife View Post

Thanks for your help, I understand the process better now thanks. At least I can see that it is normal practice and that I am not being ripped off. Next time I will go Ltd, and pay for an accountant . . . - Cheers.

You might have to get better and researching and understanding basic aspects of your engagement though. The accountant can advise but ultimately it's down to you and there is much more to understand than some basic NI legislation.

**Old Greg** · 25 May 2016, 12:14

Originally posted by HarryCodLife View Post

Thanks for your help, I understand the process better now thanks. At least I can see that it is normal practice and that I am not being ripped off. Next time I will go Ltd, and pay for an accountant . . . - Cheers.

Our pleasure.

Read up on IR35, as the main tax advantage to Ltd over brolly stems from being outside IR35.

**dx4100** · 25 May 2016, 12:17

Originally posted by HarryCodLife View Post

Thanks for your help, I understand the process better now thanks. At least I can see that it is normal practice and that I am not being ripped off. Next time I will go Ltd, and pay for an accountant . . . - Cheers.

Make sure you read up on IR35 first and everything that goes with it...

I am paying employers NI contributions