Employers NIC

iron_lady · 02-03-2009, 05:32 PM

I've recently been made unemployed from a job I have had for many years and decided to try my hand at contracting. I have been researching the in's and out's of it for several weeks, and I can't seem to get my head around the whole payment of employers NIC. If I am going through an umbrella company (which I plan on doing), why am I liable to pay their NIC?

Also (and this is my main point/question), I am aware that most agencies will offer two rates - A PAYE (through the books) and an Umbrella rate. How much higher should the umbrella rate be to take into account this extra tax? Should I also make sure the umbrella rate is high enough to offset the umbrella company's fee?

I'd appreciate all the help you can give as I have already received two contract offers and need to give them an answer by Wednesday!

Thanks in advance

IL

curleyted · 02-03-2009, 05:45 PM

Hi iron lady!

I can't remember the exact calculation you need use to take into account how much you will have to pay in NI, but in response to your first point, the reason you pay it is because your brolly will charge you a certain amount for their services, say thirty quid a week. However, your employer's contributions are going to be a lot more than this.

If the thirty quid is all their making how would they afford to run their business if they were paying this as well?

The alternative for them would be to advertise their services for a fee that includes a percentage of your daily or hourly rate, but I imagine this would both be horrendous to explain/market as well as commercial suicide if no-one else operates like that.

Hope that helps.

iron_lady · 02-03-2009, 06:54 PM

Quote:

Originally Posted by curleyted

Hi iron lady!

I can't remember the exact calculation you need use to take into account how much you will have to pay in NI, but in response to your first point, the reason you pay it is because your brolly will charge you a certain amount for their services, say thirty quid a week. However, your employer's contributions are going to be a lot more than this.

If the thirty quid is all their making how would they afford to run their business if they were paying this as well?

The alternative for them would be to advertise their services for a fee that includes a percentage of your daily or hourly rate, but I imagine this would both be horrendous to explain/market as well as commercial suicide if no-one else operates like that.

Hope that helps.

why is it that my 'brolly' pass this fee onto me and yet a direct employer will not?

do you know how I would go about finding the calculations to work out how much employer NIC is being charged?

The contracts that I mentioned before are both similar rates. They are both around £500 a day (PAYE) and £550 Umbrella. this means I'm going to be earning £250 (gross) more a week working through an umbrella. I am aware that I can claim expenses etc each week, but these are going to be minimal as I am only around a 15 mile commute from my intended place of work.

Will this extra £250 a week cover all the extra costs I will be incurring?

IL

The SMG · 03-03-2009, 11:13 AM

Quote:

Originally Posted by iron_lady

why is it that my 'brolly' pass this fee onto me and yet a direct employer will not?

do you know how I would go about finding the calculations to work out how much employer NIC is being charged?

The contracts that I mentioned before are both similar rates. They are both around £500 a day (PAYE) and £550 Umbrella. this means I'm going to be earning £250 (gross) more a week working through an umbrella. I am aware that I can claim expenses etc each week, but these are going to be minimal as I am only around a 15 mile commute from my intended place of work.

Will this extra £250 a week cover all the extra costs I will be incurring?

IL

This is a VERY common question IL and may I say it's lovely to see you in the Hot Tub. I was getting quite worried about the growing sexual chemistry between curleyted and dodgy Dave – perhaps with you around, they may tone it down a bit.

The extra £250 gross per week MAY be enough to offset the additional ERR’s NIC you’ll pay through an Umbrella but you’ll need to work the numbers through yourself I’m afraid. Factors such as expenses, tax code, pension contributions, and child care vouchers all have an impact on the amount of ‘salary’ you take from an Umbrella (the ERR’s NIC being calculated on this salary).

Have a look at…..

Agency Uplift Calculator
http://www.freelancesupermarket.com/...ry-uplift.aspx

Umbrella Calculator
http://www.freelancesupermarket.com/...alculator.aspx

Also please feel free to send me a private message whenever you want. I’m available most Friday evenings from about 11.30pm onwards

General Meister Smudge

ShortStraw · 03-03-2009, 11:18 AM

Howdy iron_lady,

If you were a permanent employee your employer would make an allowance for the amount they have to pay in NI contributions... so they say you're on £30,000 but they've already budgeted for the employers' NI on top.

Someone has to pay it and in an umbrella company that's you... unless you want to ask them to up their fee and not charge you NI... or lower your rate to account for the employers' NI.... but the net result would be the same to you.

iron_lady · 03-03-2009, 12:08 PM

Quote:

Originally Posted by The SMG

This is a VERY common question IL and may I say it's lovely to see you in the Hot Tub. I was getting quite worried about the growing sexual chemistry between curleyted and dodgy Dave – perhaps with you around, they may tone it down a bit.

The extra £250 gross per week MAY be enough to offset the additional ERR’s NIC you’ll pay through an Umbrella but you’ll need to work the numbers through yourself I’m afraid. Factors such as expenses, tax code, pension contributions, and child care vouchers all have an impact on the amount of ‘salary’ you take from an Umbrella (the ERR’s NIC being calculated on this salary).

Have a look at…..

Agency Uplift Calculator
http://www.freelancesupermarket.com/...ry-uplift.aspx

Umbrella Calculator
http://www.freelancesupermarket.com/...alculator.aspx

Also please feel free to send me a private message whenever you want. I’m available most Friday evenings from about 11.30pm onwards

General Meister Smudge

SMG, Thank you very much for your friendly (if not slightly creepy response). I used the calculators that you posted and I think I am much closer to understanding how much I will be taking home each week.

One question that was raised from your response was the issue of child care vouchers. What do you mean by this? I currently pay a small fortune on childcare for my two iron babies, so any help that I can get with Child care would be a godsend!

Just to let you know, a few moments ago I accepted the offer from Company X and opted for the £550 day rate through an umbrella. I start this new post on the 16th March, so I now have to find myself an Umbrella company. What questions should I be asking to make sure that I am getting the best umbrella company for me? Also, how long does it take to set everything up through an umbrella company? I don't want to spend two weeks researching only to find out it takes a week to set me up!

IL

The SMG · 03-03-2009, 01:05 PM

Quote:

Originally Posted by iron_lady

SMG, Thank you very much for your friendly (if not slightly creepy response). I used the calculators that you posted and I think I am much closer to understanding how much I will be taking home each week.

One question that was raised from your response was the issue of child care vouchers. What do you mean by this? I currently pay a small fortune on childcare for my two iron babies, so any help that I can get with Child care would be a godsend!

Just to let you know, a few moments ago I accepted the offer from Company X and opted for the £550 day rate through an umbrella. I start this new post on the 16th March, so I now have to find myself an Umbrella company. What questions should I be asking to make sure that I am getting the best umbrella company for me? Also, how long does it take to set everything up through an umbrella company? I don't want to spend two weeks researching only to find out it takes a week to set me up!

IL

Some Umbrellas (not all, just some) will pay you Child Care Vouchers before arriving at your gross (taxable) salary. Remember not only are you paying employee's income tax and national insurance on this gross salary but ALSO employer's NIC. Anything to can take out before the gross salary (expenses, pension, CCV) is hugely tax efficient.

If you need to locate and Umbrella, go to the red search boxes on the main site and perhaps perform an advanced search based on your requirements (weekly fee, qualifications, feedback scores etc). You can apparently sign up with an Umbrella through this website or request a call back...your choice.

Sort it now and you should be setup in a couple of hours.

Looking forward to our chat on Friday....don't bring the kids.

GGGGMMMMMSSSSSS (SMG)

curleyted · 03-03-2009, 01:42 PM

Quote:

Originally Posted by The SMG

If you need to locate and Umbrella, go to the red search boxes on the main site and perhaps perform an advanced search based on your requirements (weekly fee, qualifications, feedback scores etc). You can apparently sign up with an Umbrella through this website or request a call back...your choice.

Do you work for the site?

The SMG · 03-03-2009, 06:32 PM

Quote:

Originally Posted by curleyted

Do you work for the site?

just because i've spotted your sexual deviations doesn't mean I work for this site curley. To be honest I wish I did. It's (and this is NOT SPAM) the best website i've found in a long time for people like me. Now get back in bed with dodgy Dave.....

General (not an employee of this site).....okay

zara_blackdog · 02-04-2009, 02:28 PM

My advice - go Ltd and get an accountant - they will normally give you some free advise in the hope of getting you to sign up to them.

Mine gave me a worksheet on how much I should pay as salary and my tax/NI contributions also set this up direct with Hector.

I just hand over everythig at the end of the year and let him sort out dividends ane expences paid.