Why do I pay Employers NI with umbrella?
In permanent employment it is the company that is liable for the Employer’s National Insurance contribution (NIC).
Through an Umbrella Company, it is no different and the Employers NIC still needs to be paid on your assignment income. The rate you are offered to work through an Umbrella Company should be adjusted to allow for the this.
This needs to be taken into consideration when negotiating pay rate with the agency or end client. Please bear in mind that if you were to accept a contract paying the same rate as when you were a permanent member of staff, you would actually take home less money because of the Employer’s NIC.
Employer’s NIC is calculated at 13.8% on earnings above £162 per week and is uncapped so, not taking into account the margin that the Umbrella Company retains, this is the minimum uplift you would need on a permanent rate to achieve a similar net pay. As an example of this; you would need to negotiate £28.45 as the minimum hourly contractor rate to take home a similar net pay as a permanent member of staff earning £25.00 per hour.
You may be offered two different rates, one to be paid directly through the agency’s payroll and another, higher rate, to have your pay processed through an Umbrella Company.
The lower rate will apply if you opt to be paid directly by the agency because they themselves will be liable for the Employer’s NIC. The higher rate is offered if you are being paid through an Umbrella Company because they are liable to pay the contribution.
Provided the difference between the two rates is greater than 13.8%, you will be better off through an Umbrella Company. Remember the assignment income is not your salary rate therefore you are not paying Employers NI, and we show you all deductions made from the assignment rate to Net salary.
What is Apprenticeship Levy?
The levy requires all employers operating in the UK, which meets certain criteria to make payment to the Government to fund apprenticeships. The apprenticeship levy is calculated at 0.5% of salary payments made.
Will I get paid the same amount each week?
Not necessarily. The amount of money that you receive each time will depend on the agreed limited company rate, hours worked, business mileage claims submitted and your tax code and amounts received from the agency. Changes in any of these variables will mean an alteration in your take-home pay.
Will I receive a pay slip?
Your payslip will be available to view and download from within your secure online portal. It will also be sent to your email inbox.
What is my employment status using an umbrella?
You are an employee of your company with an employment contract in place with them.
Your company will raise invoices for the work you undertake and will execute payments to you as necessary. As an employee you benefit from all the benefits and statutory rights associated with full time employment.
Why do recruitment agencies use umbrella solutions?
Umbrella solutions help agencies to minimise their overheads, employment risk and administrative burden of the management of temporary employees. We allow agencies more time to focus on their core function which is to source and place talent in relevant roles.
Who takes care of my Tax and NI contributions?
The Umbrella Company you are employed by will ensure that you pay all necessary tax and national insurance deductions via PAYE
Why do I pay Employers pensions?
In permanent employment it is the company that is liable for the Employer’s Pension contribution. Through an Umbrella Company, it is no different and the Employers Pension Contribution still needs to be paid on your assignment income. The rate you are offered to work through an Umbrella Company should be adjusted to allow for this.
This needs to be taken into consideration when negotiating your pay rate with the agency or end client. Please bear in mind that if you were to accept a contract paying the same rate as when you were a permanent member of staff, you would actually take home less money because of the Employers Pension Contributions.
Remember the assignment income is not your salary rate therefore you are not paying Employers Pension Contributions, and we show you all deductions made from the assignment rate to Net salary.
Will I have to complete a Self-Assessment tax form?
Not usually, but there are exceptions. For example, if you:
– Have received £10,000 or more gross income from savings or investments before tax (including dividends).
– Were self-employed at any point during the tax year.
– Were a Director at any point during the tax year.
– Earn over £100,000 gross income during the tax year (all income).
– Have been sent one by HMRC.
– Are claiming £2,500 worth of expenses/subscriptions against tax.
If HMRC sends you a Self Assessment form you must complete it and send it back.