When you are employed directly by Worldwide Education, the agency is liable to pay Employer’s National Insurance (NI) contributions on your salary. When you work for an Umbrella Company, it is no different except for the fact that it is the Umbrella Company that is responsible for paying this. Each time you are due to be paid, the Umbrella Company therefore needs to calculate your salary at a level which leaves enough money left over for them to pay the Employer’s NI to HMRC. If you were an employee of Worldwide Education, they would be paying the Employer’s NI on your salary, and this would usually be reflected in a lower daily/hourly rate for the assignment. You should therefore normally expect your rate to be higher when working through an umbrella company compared to working through an agency. You will need to take this into consideration when negotiating a rate with Worldwide Education. Please bear in mind that if you were to accept a contract paying the same rate as if you were a permanent member of staff, you would take home less money due to the adjustment the umbrella company has to make to ensure they can pay the Employer’s NI.
Employer’s NI is operated at the following standard rates:
Up to £157 per week/£680 per month – 0%
Over £157 per week/£680 per month – 13.8%
From April 2017, the Apprenticeship Levy needs to be paid by employers with a payroll of at least 3,000,000 in much the same way as Employer’s NI. It operates at a flat rate of 0.5%.
All employees are legally entitled to 28 days’ paid leave per year, or the equivalent proportion if the period of employment is less than a year. For temporary workers employed on shorter assignments, this equates to 12.07% of salary. Agency rates take account of this holiday entitlement, so when calculating your salary, we also take this into account. The holiday pay element of your pay will show separately on your payslip, but you have the choice of whether you wish to receive this each week together with your regular pay or whether you would prefer to keep this aside to take at a future date. Please note, unless we receive an indication to the contrary, we will assume you wish this to be paid out at the same time as your regular pay.
The Umbrella Company retains a small amount of the funds received from Worldwide Education each time they pay you to cover the costs they incur in employing you, including their office and admin costs, payroll costs and insurance costs. This amount is agreed with you as part of your registration with the Umbrella Company.
If you have asked to make payments relating to a personal pension scheme or childcare vouchers, the Umbrella Company will also make adjustments for these.
They will then pay your salary, subject to the following statutory deductions:
Employee’s NI, operated at the following standard rates:
Up to £157 per week/£680 per month: 0%
£157 per week/£680 per month and £866 per week/£3,750 per month: 12%
Over £866 per week/£3,750 per month: 2%
PAYE (Income Tax), operated at the following standard rates:
Up to £221 per week/£958 per month: 0%
£221 per week/£958 per month to £866 per week/£3,750 per month: 20%
Over £866 per week/£3,750 per month: 40%
The PAYE calculation is a bit more complicated if your salary is over £1,918 per week. If this applies to you and you have any queries, please contact your Umbrella Company.
Please note PAYE is assessed each time you are paid to ensure you have paid the correct amount of tax for the year to date. For example, if you have not worked for many weeks, you may receive a tax refund. However, National Insurance does not look at the overall position for the year and must be operated at a fixed rate each time salary is paid.
To give the flexibility to take into account different rates and adjustments, the terms of your employment with your Umbrella Company specify that your salary will be made up of two elements:
Basic pay, paid at National Minimum Wage and therefore fixed by law based on the number of hours you work
Variable profit share bonus, also based on the number of hours you work but taking account of the rate agreed with Worldwide Education and the adjustments outlined above.