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Why am I paying Employer's NI contributions?

Discussion in 'Supply teaching' started by selenag70, Jan 20, 2011.

  1. My agency uses an umbrella company to manage their payroll, and I've noticed that I'm paying both employer's NI contributions and employee's NI contributions. I don't really understand why. Could anyone explain this?
  2. My agency uses an umbrella company to manage their payroll, and I've noticed that I'm paying both employer's NI contributions and employee's NI contributions. I don't really understand why. Could anyone explain this?
  3. Crowbob

    Crowbob Lead commenter

    I don't mean to patronise, but are you sure you are paying them? Often they appear on the deductions line but they are not deducted from your gross pay. They are there for information...
    rolysol likes this.
  4. I have to pay this too, so you're not wrong...I think it is because we're down as self employed, but I'm not 100% sure. I also have to pay out margin, do you have to pay this? I think its the agency's cut of the money, but again not sure...just seems like all these things are taken out by the umbrella company before I see any of it!!
  5. Yes, I have to pay the margin too.
    I emailed the umbrella company and they said:
    It is standard when coming through any umbrella company that you pay both employers and employees national insurance contributions.
    I still don't understand why this is though.
    Regarding the margin they said:
    The Key margin is worked out at 4.5% of your weekly pay with a minimum payment of £8 and a maximum payment of £19
    Key deducts this margin from the funds received from your agency to pay for the administration of the umbrella service and the benefits it provides.
    I'm just not convinced this is good value for money.

  6. its not I really don't understand either of my wage slips too, but I feel like a complete wally if I ring up the agency and tell them I am confused about where my money is going. i.e last week I worked/earned 264.00 at top of my timesheet 164.00 was processed as my "period payment" I am really confused as to how my timesheet/payslip works though, as the total of my "period payment" plus "expenses" and "rolled up holiday pay" always equals the equivalent of worked/earned money minus employers NI contributions, my NI contributions and tax and obviously payment to umbrella company.

    Does that make sense??
  7. Stop using umbrella companies. They are another tax. With all the time you have, unless you are some sort of freak of supply, you have ample time to sort out a limited company and VAT register, etc, etc and do your accounts instead of moaning about how much of a hassle it is. THEN, you may either pimp yourself out directly to the school, or work through an agency.

    NB: An agency will not use you if you are a partnership or a sole trader, because the definitions of "employer" mean that if a single LEA is the customer, the agency breaks and gets hammered by IR35 legislation. If you are a limited company, you have to prove that you are making yourself available for work in other LEAs (which you will)

    So then, as a limited company which is VAT registered, you take your VAN (get a van) which you claimed VAT back on to school, get your fuel paid for (as vans are allowed to claim back fuel against tax and VAT wheras cars are not) on the way to work, claim expenses on your computer equipment, get the VAT back, costume (suits). Essentially, all you pretty much pay tax on (if you play it right) is your beer money.

    Self employment is the way to go fo-shizzle, however, given the current nature of supply, you'd probably be silly wasting all that time and effort only for the school to hire a cover supervisor

    Do not use an umbrella company, they merely profit on your laziness
  8. It is almost like going back to the abuses that were common when agencies first came on the scene about 20 years ago. One such 'fiddle' was to give your gross pay from which they deducted your NI contributions and income tax; only then did they deduct their 'cut'. So, in effect, you were paying their income tax for them.
  9. mereside

    mereside New commenter

    Umbrella companies are the scum of the earth, they are lower than the snake's b*******s. Pressurise your agency not to use them. Write to the Inland Revenue to verify what they say.
    rolysol and schoolsout4summer like this.
  10. jubilee

    jubilee Star commenter

    Interesting but how do you get CRB clearance when offering yourself as a sole supply teacher through your own company?
  11. jubilee

    jubilee Star commenter

    To the OP ... whenpaid through an umbrella company the agency are no longer your employers. They simply buy in your services in the sme way that you might pay for a plumber but not be the employer.
    The umbrella company is also not employing you; they are simply cting as your office administration, for which they deduct a fee.
    You are in effect self employed and thus pay employee and employer's NI. I assume that you also get to claim tax relief for travel and subsistence.
  12. Thanks for the replies. It's still pretty confusing, but jubilee seemed to explain it quite well.
    The thing is, when I signed up with the agency, it wasn't really presented as a choice. It was just a case of, 'this is the company we use to handle our payroll, sign here.'

    rolysol and thatmaninthehat like this.
  13. Jubilee is right but beware if you claim tax relief on expenses. Although umbrella companies say that it is all kosher, this is a grey area. It only works if you claim your home as your office and you do the substative part of your work at home. As a supply teacher is this the case? There is case law on this altho it refers specifically to a supply teacher employed by LEA.
    I am not convinced that HMRC will accpet this scenario when it gets round to looking at it. Will they be looking for backtax etc?
  14. IR35 is the chappy in the woodpile here. If you are "employed by the LEA" that means the LEA are your sole employer. If the LEA are your sole employer, they are responsible for the payment of your Tax and NI. If you are a sole trader or a partnership. If you are a limited company you are not.

    Now, if you are a Ltd Company, the responsibility for submitting accounts and their integrity lies with the director(s). These have to be done. If my agency (a limited company) employ you (also a limited company) and it transpires that you are only working for the LEA, I pass the buck and it is you (the limited company closest to the end user) who gets nailed.

    As a limited company, you will 99.99999% be fine as HMRC will probably not put the heat on you. However, you must outline that you are advertising your services (being your own agent) to a variety of "customers". So, LEA stuff and private stuff.

    This is how I understand it. IR35 was designed primarily as an obstacle to prevent sub-contractors to one service provider avoiding tax. As you will be providing education services to a number of customers, including home tutoring and you can prove this, it doesn't apply to you. I gather there is a grey area and then it comes down to brinkmanship and bullyboy tactics by the taxman. The only time you have something to worry about is if you are in the middle of an LEA and you can't prove you have been pimping yourself out more than this.

    I'd also go one step further and get VAT registered as you put everything through the VAT and as you are pimping yourself out, you are 0 rated. You claim back everything you can, including fuel.

    Look into the legislation regarding VANS and expenses deductible mileage. They are different from cars.

    The above sadly, is a graft heavy, meaningless exercise as you will be set up, like a finely oiled machine only to get a CS actually get the work.

    Besides, when I was looking at pimping teachers myself, when I spoke to most cover co-ordinators, they were phlegmatic about where the staff came from "It's not out of my wages" "I don't get a bonus for saving money" "My job is to get someone in, regardless of the cost"..... that's the way it was in Plimuff. They'd probably see you as a hassle and a grey area to be avoided and use agency staff if the old CSs are all ill/training/etc. When I spoke to the LEA bloke about it, he wasn't ***** either. Someone else's money, mines OK. Bloody jobsworth wastes of oxygen.
  15. tk212

    tk212 New commenter

    Hi did anyone get to the bottom of this!
    I was sold a umbrella company by my agency in September. I have since moved agencies and compared what my take home with them would be and it was the same.
    I do not understand why I am paying the employers national Insurnace and my own. This last month I paid double my partners NIC contributions and he earns triple.
    How is this avoidable!? If the agency pay me directly are they deducting NIC too?
  16. lulu57

    lulu57 Lead commenter

  17. fleeps

    fleeps New commenter

    Three agencies have told me that I HAVE to use an umbrella company. Apparently, changes in regulation will put a stop to the practice of setting up as a ltd company for the purposes of avoiding this. Is that true?
  18. Pennyforyourthoughts

    Pennyforyourthoughts Occasional commenter

    It all sounds good until you realise the implications of this payment method had not been explained to you. Best option is to insist on PAYE and if you are told categorically it is not possible then threaten to go to HMRC for advice before committing to that method of payment. I believe HMRC is clamping down on the practice........
  19. purple sparkle

    purple sparkle New commenter

    I have been offered a potential maternity cover through one of the agencies I am registered with which is due to run until Christmas from Easter. I have told them I like to get paid via PAYE. Both my other agencies have paid via PAYE. They have said they use a umbrella company but assure me that they will make sure my net pay either matches or exceeds what I am currently being paid through PAYE. What are peoples thoughts on this?
  20. stan-dards

    stan-dards New commenter

    Has anyone else on supply besides me who worked for Capita under the umberella company Key Portfolio had any HMRC tax problems .I paid PAYE every week & filled in all the expense form yet HMRC saying I have not paid enough tax? Any advice greatly appreciated

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