My first payslip with IR35 and I don't get it! My first payslip with IR35 and I don't get it!
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  1. #1

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    Question My first payslip with IR35 and I don't get it!

    Hi,

    I used to be a LTD contractor and just moved to IR35. I got my first payslip but I don't understand it. Can someone explains to me those numbers?

    The weekly pay is £3825 based on a 5-day week at £765.

    The total paid by the client to the umbrella company is £3825.

    Then the umbrella company takes £18 off per week as margin.

    But then they say Employer NIC is £437.55 and apprentiship levy is £16.70.
    There is also employer pension contribution for £13.08.

    And so I am left with a gross pay of: £3339.

    Now when I ask the umbrella company how they arrive to that £3339 they tell me they just removed all the figures above from the £3825. But then when I asked them how they calculated employer NIC and the apprenticeship levy, they say they applied the percentages (13.8% for NIC and 0.5% for the apprenticeship levy) on the £3339 .... It doesn't make sense to me that they calculate NIC and levy based on a number that they say they generated using those 2 figures... Which ones come first, it cannot be both.

    Anyone understands those numbers??

    Thanks.
    Jerome

  2. #2

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    Why can't it be as that is exactly what they say as both items are set as fixed percentages of your gross salary.

    Oh and throw money into your pension to reduce the amount you lose pay in NI..
    merely at clientco for the entertainment

  3. #3

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    Thanks for your quick reply.

    I understand how they are calculated if we take the gross salary (3339) but I don't understand then how we go from the £3,825 to £3,339? The only thing I was told is that my daily rate is £765.

  4. #4

    Prof Cunning @ Oxford Uni

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    Quote Originally Posted by petafin View Post
    Hi,

    I used to be a LTD contractor and just moved to IR35. I got my first payslip but I don't understand it. Can someone explains to me those numbers?

    The weekly pay is £3825 based on a 5-day week at £765.

    The total paid by the client to the umbrella company is £3825.

    Then the umbrella company takes £18 off per week as margin.

    But then they say Employer NIC is £437.55 and apprentiship levy is £16.70.
    There is also employer pension contribution for £13.08.

    And so I am left with a gross pay of: £3339.

    Now when I ask the umbrella company how they arrive to that £3339 they tell me they just removed all the figures above from the £3825. But then when I asked them how they calculated employer NIC and the apprenticeship levy, they say they applied the percentages (13.8% for NIC and 0.5% for the apprenticeship levy) on the £3339 .... It doesn't make sense to me that they calculate NIC and levy based on a number that they say they generated using those 2 figures... Which ones come first, it cannot be both.

    Anyone understands those numbers??

    Thanks.
    Jerome
    OK, employer NICs, etc are added on to a salary - a normal employee wouldn't see them, so what umbrella companies do is back calculate. They'll have a spreadsheet that will work it all out for them.
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    Why can't it be both? They are separate levies on your gross, so deducting them from the gross is entirely reasonable.

    That said, did you know that they would be taken from the advertised headline rate of £765? Because they should have been advertising the rate at £674.15. That is the rate to you since ErNICs and AL are not your liability...
    Blog? What blog...?

  6. #6

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    Quote Originally Posted by malvolio View Post
    Why can't it be both? They are separate levies on your gross, so deducting them from the gross is entirely reasonable.

    That said, did you know that they would be taken from the advertised headline rate of £765? Because they should have been advertising the rate at £674.15. That is the rate to you since ErNICs and AL are not your liability...
    It does depend on whether a key information document explaining the rate of pay was given to the OP by the agency - he should have been in which case it's just dubious rather than completely wrong.
    merely at clientco for the entertainment

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    You could put your rate into any umbrella's online calculator to check the sums.

    IIRC you should have been given a Key Information document that detailed what your take home would be. I agree with Mal that, technically, the rate should have been advertised net of the employer's liabilities (like a permie rate) rather than the grossed up rate.

  8. #8

    Prof Cunning @ Oxford Uni

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    Y = X + (0.138*(X-169)) + (0.005*X) + (0.0039*X) + 18

    Then work that back to:
    x = (y + 5.322)/1.1469

    Where Y is the amount paid to them. X becomes the amount paid to you.

    Employer NIC = 13.8% of employee weekly pay for anything over £169 per week
    Everything else is obvious
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  9. #9

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    Quote Originally Posted by ladymuck View Post
    You could put your rate into any umbrella's online calculator to check the sums.

    IIRC you should have been given a Key Information document that detailed what your take home would be. I agree with Mal that, technically, the rate should have been advertised net of the employer's liabilities (like a permie rate) rather than the grossed up rate.
    Smurf rates as Dave Chaplin calls them are very popular with agencies as they make the rate look 14.3% higher than it actually is...

    Oh and while the ASA are supposed to manage the advertising of recruitment adverts they really can't be arsed....
    merely at clientco for the entertainment

  10. #10

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    Quote Originally Posted by WTFH View Post
    Y = X + (0.138*(X-169)) + (0.005*X) + (0.0039*X) + 18

    Then work that back to:
    x = (y + 5.322)/1.1469

    Where Y is the amount paid to them. X becomes the amount paid to you.

    Employer NIC = 13.8% of employee weekly pay for anything over £169 per week
    Everything else is obvious

    Petafin is worth £765 a day, but cannot use excel or comprehend ENIC... perhaps he's a sockie from Asda not M&S ...

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