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Employer's National Insurance Contributions or social premiums

 

In our line of work there are certain questions that keep cropping up, for example:

What are the requirements for payment of Employer's National Insurance contributions?

What is the difference between salary and agreed payments?

Which tax-efficient Cayman Islands fund should I be paying into?

Let's leave the third question for another day - although, just to be clear, the short answer is none of them! Instead, let's see if we can't sort out this whole confusion about agreed payments and national insurance contributions...

Now, we're obviously not your typical kind of employer. We're an umbrella company. So although you won't provide services for us per se, we will still be classed as your employer. And, just like any other employer, we're legally obliged to pay employer's national insurance contributions to the lovely people at HMRC.

If you provide your services through International Umbrella Ltd, we will also provide a contract of employment, just like any other employer would.

Your contract is just as important for you as it is for us. It means you have the reassurance of knowing that the details of your employment are all officially laid out, including full details of payments of earnings due to you under that contract. So you will always have a clear account of monies paid, and deductions made, in line with UK tax law.

Now we get to the protecting-you-under-our-umbrella bit... Because we act as your employer, we also need to enter into a separate business-to-business contract with the recruitment agency or client. This is not something you'll need to get involved in at all. So you can concentrate on doing what you do, without having to worry about contracts or NI contributions. We'll take care of all of that.

We'll invoice the client or agency for all the hours and days that you work - and then receive the payment, in line with the agreed terms. This is the agreed payment, not to be confused with your salary. As your employer, we still have to pay the employer's national insurance contribution and take our agreed margin. 

You'll receive the balance (effectively your gross salary), which will then be subject to the usual income tax deductions and employee's national insurance contribution before it reaches your bank account as your net pay.

For clarity, responsible umbrella companies always show how the contract rate has been processed on your payslip. So if you see Employer's National Insurance Contributions on your payslip, you'll know why it's there, and you'll be able to see that it has already been paid.

Finding the right umbrella is a bit like finding the right pair of shoes. You need something that fits your lifestyle, and feels comfortable. So shop around until you find that perfect fit. But do bear in mind that every single umbrella company works to the same model. We have to. We all work to the same PAYE regulations. So look for subtler differences when choosing your umbrella...

And  if you'd like to find out more about International Umbrella Ltd, why not give us a call on +44 (0) 121 663 1163/4 ? We can talk through all the little things we do that will make a big difference to you. Email the MD Antony.Edwards@internationalumbrella.com to ask him to call you back.  

In the UK those aged 22-those over the state pension age will pay as follows: -

up to £156.00 per week          Employee   0%         Employer       0%

£156 - £827 per week             Employee 12%         Employer  13.8%  

Above £827 per week             Employee    2%        Employer  13.8%                   

Those contracting abroad should be aware of high social costs payable i.e. 

in France the employer social charge is between 42 and 48% (and we use 45% as an average in our illustrations). Unless their are special tax concessions there - these are the high costs which are levied in France. It is as well to get an accurate ilustration here rather than promises of higher returns with disastrous long term consequences. In Spain the percentages are 6.40 % for the employee and 31. 95% for the employer (us). In Belgium the social premiums payable are, Employee: 13,07% Employer: 30,66%.The Netherlands  Dutch social security premiums comprise as follows : - Unemployment Insurance WW-awf 2,44%, Disability Ins basic premium WAO/ WIA - basis 6.38%, ZWV 6.75%, Sector Premium 1.00%, Diff Premium Total 0.63%, Premium component WGA - vast 0.33%. Premiun component WGA -flex 0.24%,Premium component ZW 0.44%, Annual Salary Limit 52,763.00 euros. It means that International Umbrella must meet a total payment for you each month of 27.21% of 'salary' which comprises of two main parts 16.61% Employer's social premiums and 10.6% which contains all the branch related pension costs. In Italy the Company share or employer contribution is 35% and an employee pays 10%. 

 

 

Did you know that ...................................?

The figures behind the facts about contracting in the UK

 

The FCSA's latest edition of Insights and Analysis Contingent Workforce (IACW) came out recently. Why should you care? Because behind that snappy title is a wealth of invaluable information for umbrellas and freelancers, recruitment agencies and clients. We'll get to some of the juiciest nuggets in a moment. But first some background...

The FCSA is the trade association for professional employment service providers like us. Their regular round-up of news and employment data presents a fascinating, constantly updating view of the contracting world.

For instance, did you know that non-UK workers made up 16.6% of the workforce in the first quarter of 2016? In case you were wondering, that's an increase of 1.87m since the first quarter of 2007. And workers from EU27 countries increased by 1.1m over that time too.

Interesting as these facts are in isolation, it's even more interesting to conjecture what's going to happen next. Because post-Brexit, a whopping three quarters of these non-UK workers no longer match the eligibility criteria to work in the UK.

We'll bet these are the sorts of issues that are already giving Theresa May some sleepless nights in her No.10 adjacent pad.

And talking of the government, IACW is an excellent source of current (and absolutely unbiased) employment data. No massaging the figures here!

So, for example, we can see that although unemployment was virtually static in the first quarter of 2016 compared with the last quarter of 2015, there were still some significant takeaways relating to duration of unemployment.

While the numbers of people who had been out of work for more than a year fell by 22K, the numbers of people out of work for 6-12 months increased by 20K.

The facts about freelance work in the UK

But for us, and I suspect most of you, the big news comes on page 8. This is where we get the lowdown on the latest contingent working figures, based on FCSA research. It shows that there are currently around 1.65m temporary workers in the UK, of whom 4.2m are self-employed and 400 - 500K are umbrella workers.

The report goes on to cast a wider eye on a whole year's worth of data for 2015. And we can see some increases in the number of temporary employees (as a proportion of the whole workforce), particularly in caring, leisure and other services - a rise of 7.4%, and elementary occupations - a rise of 8.1%.

The self-employed sector showed a 22% rise in professional occupations, and skilled trades registered a big rise of 34.9%.

What's happening in the NHS is happening everywhere

IACW provides a fascinating insight into the employment situation in the NHS. And what's particularly interesting is how what's going on there is like a microcosm of the whole contracting situation in the UK at the moment.

In her Response from Julia column, FCSA Chief Executive, Julia Kermode, sums up the state of play. The standout quote here comes from Chris Hopson, Head of NHS Providers, who says there is a "clear gap between the quality of care we all want and the funding available" to provide it.

It isn't a question of management any more; Trusts can't be expected to deliver the impossible. The burden being placed on all staff - not just permanent staff, but temps and umbrella staff too is simply "intolerable". There's simply too much to do and too few to do it. And that's the problem - not just for the NHS - but for the UK economy in general. Post-Brexit, overseas workers with the skills we all want and need may think twice about the attractiveness of the NHS or other UK institutions. With skills to sell, they can market themselves anywhere in the world. 

What about domestic workers? Individuals with talents that the whole world wants, know they can sell their skills anywhere and everywhere. All they have to do is sign up with an umbrella company and leave the hassles of the NHS, or their usual industry far behind as they siege on fresh opportunities elsewhere.

Just how attractive are we?

Our attractiveness as a place to work is going to come under some serious scrutiny over the coming months and years. And there are certainly going to be some challenges ahead if we're going to stay genuinely competitive in the world markets. There are challenges for our 'lifeblood' organisations too; with the pressure increasing on organisations like the NHS to go on delivering effective services with fewer staff on a tighter budget.

If the NHS really is a barometer of UK industry in general, then we can see that every employer who relies on very specific skills (that are sure to be very lucrative in a hundred other countries) is going to struggle.

Threats do sometimes bring fresh opportunities in their wake, so can filling the skills vacuum present more opportunities for people who umbrella workers?

Maybe.

The challenge, as ever is going to be finding a sufficient quantity of appropriately skilled workers to fill the gaps. And with more UK workers being tempted overseas, and fewer skilled workers coming in, that is a monumental challenge, make no mistake about it.

There's another issue. A report published by the Public Accounts Committee (PAC) raises concerns over the ability of the NHS and the Department of Health to forecast, influence, manage and budget for the supply of appropriate levels of clinical staff.

In an effort to keep general recruitment costs down - as well as the cost of bringing in agency and contract labour - hourly rate caps have already been applied, with the PAC adding the additional recommendation that the NHS needs to address the issue of the increased demand for agency staff.

The figures behind the facts

IACW poses some pretty big questions for the NHS, the United Kingdom and the temporary / contract workforce There may not be any easy answers on offer, but at least having the figures behind the facts can help us all understand some of the market forces driving change in our industry.

The latest issue of IACW is available as a PDF on the FCSA website, and if you'd like to talk to us, about any of the issues it raises, just give us a call.

 

Above artlices written for us by Chris Lomas - July 2016

 

New territories

International Umbrella Ltd will now run PAYE services in ITALY as well as in Belgium, The Netherlands, Spain, France, Sweden, Rep Ireland, among the most popular work destinations. Read full article

Simple guide to jobs abroad for Brits – what’s involved with working overseas?

Simple guide to jobs abroad for Brits – what’s involved with working overseas?

Working abroad as a contractor can be a very rewarding experience - but it's not for everyone. Read our simple guide to jobs abroad for Brits - and how International Umbrella can help. Read full article

Setting up as a contractor? Read about expenses and dividend rates first

Setting up as a contractor? Read about expenses and dividend rates first

Setting up as a contractor can leave you with more questions than answers. That’s why we’ve put together a guide about expenses and dividend rates. Read full article

Setting up a limited company? What is an umbrella company? The facts.

Setting up a limited company? What is an umbrella company? The facts.

Setting up a limited company? Here’s a comprehensive guide to what’s involved. Plus, we answer your question: what is an umbrella company? Read full article

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Our Services

  • PAYE locally – including Belgium, The Netherlands, France, Spain and other countries – please enquire.

  • Delivering tax efficient solutions across Europe and Internationally from the dedicated UK office.

  • Best practice – we work transparently with no unexpected fees, false promises or unrealistic return on income rates.

The Complete International Umbrella Service

Taking the decision to work abroad can be a difficult one. Often it involves working away from family and friends in an environment that presents new challenges. Having the support of a respected umbrella company to take care of all your in-country tax and social premium deductions will ease these additional demands.

International Umbrella has over 23 years’ experience of contractor accountancy and international compliance solutions.  We have the required skills, knowledge and  experience, to provide the contractor, recruitment agency and end client, the complete international compliance service.

Contracting Resources

Useful information to help you when contracting abroad.