Employers NIC Uplift?

[Light_Box]

Hi all,

Another day, another poll from Light Box!

For those of you working through your own Limited Company or an Umbrella Company, may I ask whether you generally expect the agency to pass ALL the Employer's National Insurance saving onto you in your rate? We get asked this question all the time even though we don't run PAYE payroll in-house so it would be good to know what other agencies are up to.

Thanks
LB

[Malvolio]

No Comprendo...

MyCo charges a flat fee for its services and pays all required taxes. What have NICs got to do with anyone else? And I would be mightlily annoyed if I though the agency was witholding part of my fee over and above the agreed margin.

[The SMG]

why are you asking about Employer's National Insurance if you (the employer) don't actually pay it?!? Didn't you say your contractors worked through PSCs (steady Malvolio) or Umbrellas?

I'm confused ...please clarify

G

[JeffreyC]

I think I know what Light Box is asking....

If you work through an agency, generally they should give you two rates.

1. A rate to work on their payroll as a PAYE contractor.
2. A rate not to work on their payroll but through your own LTD or an Umbrella.

If you choose the latter, the agency is saving a fair old chunk of employer's national insurance, particularly for higher paid contractors (c £250 + per day). This saving should be reflected in the LTD / Umbrella rate because, being the employer, it'll be the LTD / Umbrella that has to pay the employer's national insurance on the salary you receive.

This is particularly applicable if you work through an Umbrella because the contractor's gross salary is generally high (after the deduction of allowable expenses). Since a high gross salary will then attract employer's national insurance at 12.8% this can add up to hundreds per week. If the Umbrella charges £25 they're not paying it, the agency (bless them) are not paying so unfortunately Mr Contractor takes the hit.

There's no issue if the agency increases the LTD / Umbrella rate to account for the employer's national insurance. In my experience they generally don't or they certainly don't pass on all the saving which makes for a very uncomfortable conversation between contractor and umbrella on a Friday, which starts off something like this...

"Hi Jeffery, I've checked my payslip this morning and I have a quick question......why the h3ll am I paying Employer's National Insurance?"

[Malvolio]

Nope. still confused...

[CrazyMoose]

Come on Malvolio, it's not difficult. Agency / or client should up the rate to reflect that fact that they don't have to pay ERR NIC. I've had this discussion several times with agents & agencies over the years. On one of my very first contracts the crafty agent gave me a PAYE rate of £27 per hour. When I told him i'd be working through my own Limited Company, he adopted the usual poker face and politely told me the rate would be £27 per hour, knowing full well the agency would probably save about two hundred quid a week.

I know some agents that are actually given incentives to 'push' contractors down the Limited Comp / Umbrella Company route just so the agency doesn't have to pay the Employer's National Insurance.

CM

[Malvolio]

I understand the point. It's just that out of the several thousand Contractors I've dealt with over the years, one has been an Agency PAYE employee (and that for very good reason). Agencies push contractors down the LtdCo/Umbrella route because of S44-7 IETPA (S134c as was).

In your example £27 an hour gross goes to the freelance contractor or £27 gross goes to the PAYE worker, from which ErNICs will be deducted as well as EeNICs and PAYE. Just don't expect to see it on the payslip.

[lurch]

I've seen a very mixed bag over the years, for a very long time £1 more seemed to be the norm regardless of the initial rate (making this less than 12.8% in the vast majority of cases), but I've seen an uplift of greater than 12.8% in more than one case (the max being around 16-17%) when the company in question has considered the payroll saving as well. I won't deny that was a rare thing though.

Current uplift seems to be around 10%, but hopefully we'll see that improve as the supply of jobs increases.

[The SMG]

Originally Posted by Malvolio

In your example £27 an hour gross goes to the freelance contractor or £27 gross goes to the PAYE worker, from which ErNICs will be deducted as well as EeNICs and PAYE. Just don't expect to see it on the payslip.

Umbrellas do breakdown and report Employer's NIC on the employee's (or contractor's) payslip. Although its a tax attributable to the Umbrella (the employer), it's still the contractor that actually pays it out of the gross receipts rec'd in from the agency or end client.

G

[Howzat]

I've rarely seen the whole employer's nic saving passed back. Although I work through my own Limited Comp and therefore pay minimal amounts of employers / employees nic, it's quite worrying just how many agents simply don't understand the concept. Well, either they don't understand or they're being very crafty. If I agree a PAYE rate of £30, i'll expect this to rise by at least 10% to work Ltd.