Why am I paying Employers NI?

[TelcoData]

Sorry to resurrect this thread...

You need to agree a rate which is 20% at minimum higher than you expect to be paid to factor in Employers NI, Umbrella Fee and Apprentice Levy.

In my field this took a few years to factor in but rates have increased to cover these additional costs (almost).

At one time Agencies offloading payroll benefited both the Agency (lower payroll costs) and the Contractors (HMRC allowable expenses) however as HMRC has now pretty much stopped all such allowances the Agency wins as low payroll costs and we absorb all additional costs.

The idea from HMRC is we as contractors must be treated as employees (hence no expenses anymore) and we as employees would receive similar benefits from employers .. not in my world has that happened! We provide a fluid and dynmanic workforce that helps businesses yet we'll never realise the benefits of being employees!

/rant

[Clipper Contracting Group]

Morning all,

With regards to the Employer's NI, as has been said above, the simple explanation is that a temporary worker will typically be offered a higher rate of pay (sometimes called the contract or limited rate) than if they were employed
directly by the recruitment agency. As the employer, the Umbrella company must cover employment costs such as employer’s national insurance, holiday pay, pension contributions and the apprenticeship levy. These employment costs are deducted from the contract sum received from the agency. We also retain a small margin to cover the cost of the service and what is left is the worker’s taxable (or gross) pay.

[cojak]

Welcome Clipper, and thank you for not launching into advertising - you’ve obviously read our T&Cs

A name would be nice though, it means there’s a person on the end of a login!

[Jacobskelly]

Can umbrella payroll survive if a blanket ban is forced on sole traders and limited companies in Mondays Budget?

[cojak]

Can umbrella payroll survive if a blanket ban is forced on sole traders and limited companies in Mondays Budget?

There will be no blanket ban on sole traders or Ltds, but umbrellas will thrive if many will be forced to use them by agencies.

[lucyclarityumbrella]

If we look back at the previous T&S legislation, the government were determined to push through and it happened.IR35 in the private sector is likely to continue, but I think we would be best placed to push for a fair determination and penalties to end clients for blanket decisions.

[Guvernator]

Still not sure why Employers NI is expected to come out of your day rate if you are caught under IR35. If caught you are deemed to be an employee so surely you should be paying employee NI, not Employers NI or am I getting this all wrong.

[webberg]

Still not sure why Employers NI is expected to come out of your day rate if you are caught under IR35. If caught you are deemed to be an employee so surely you should be paying employee NI, not Employers NI or am I getting this all wrong.

No, you're getting it very right but it's a position that is only now becoming obvious to many.

The problem is that the traditional manner of pricing your work in the market is to quote the end client a gross day rate.

From that day rate, an umbrella will take tax, em'ee NIC, their fee and em'er NIC.

So a day rate of £300 gross, earned for 260 days, might produce £75 tax, £22 em'ee NIC, £37 em'er NIC. So before fees, £134. Net £166.

(In fact in some instances, the em'er NIC is calculated as £42 per day as the first £8,500 or so of salary is exempt from NIC, but is occasionally deducted anyway.)

What should happen, post April 2017 for public body engagers and April 2020 for most private sector engagers, is that you should get £300 less tax and em'ee NIC (and fee) = £203. The employer NIC should be paid direct to HMRC by the engager or their agent.

This will not happen unless you insist on all parties in the chain abiding by their legal obligations.

In turn, this needs a change in how rates are described and shown to you.

[Vincenth1]

Well said Webberg, it's shocking how ignorant and blatant many Umbrella's and employers are regarding compliance with their legal obligations around deducting employer's NI from the contractors advertised rate. Unfortunately, it will take legal challenges to force them to change this practice.

[Sheep1019284]

Apologies if this has been answered on other threads...

When being setting rate expectations with prospective clients who will only consider contractors via an umbrella company...

Is it right to ask the question to the employer...

"At 400 per day, do you also pay on top of that a rate to the umbrella company that covers the umbrella margin, employer national insurance & Apprenticeship levy?"

?

Is it the general consensus that the end client should legally be factoring this into an 'assignment rate'? I noted that on various umbrella calculators the breakdown deducts Margin, Employers NI & levy from your take home as an example.