Umbrella company FAQs – who pays the Employers National Insurance?

At Liquid Friday we like to say it how it is, without jargon or technical lingo, so that contractors know exactly what to expect when they sign up with us (or any compliant umbrella company for that matter.)

In this blog series, we’re making it our mission to tackle some of the most common questions we get asked day to day about working through an umbrella company.

Who pays the Employers National Insurance?

In any employment relationship, it is the employer who is liable for the Employer’s National Insurance contributions (commonly shortened to Employers NIC or NIERS)

When your employer is an umbrella company, this is no different – Employers NIC still needs to be paid on your assignment income.

The rate you are offered to work through an umbrella company should be increased to allow for this. This is known as the “assignment rate” or “charge-out” rate.

Liquid Friday always negotiates a higher rate of pay with its agencies to make sure you are always better off.

How Employers NIC is calculated

Employers NIC is calculated at 13.8% on earnings above £166 per week (£719 per month or £8,632 per year) and is uncapped. (2019/20 rates and thresholds.)

Not taking into account any allowable expenses, or the margin the umbrella company retains, 13.8% is the minimum uplift you would need on a permanent rate to get a similar take home pay.

Permanent rate Vs umbrella assignment rate

When you land an assignment you may be offered two different rates by your recruitment agency or company, one to be paid directly on their payroll and the other to have your pay processed through an umbrella company – the umbrella assignment rate or charge-out rate.

The lower rate will apply if you opt to be employed directly by the agency / company because, as your employer, they are liable for the Employers NIC and other costs.

The higher rate is offered if you are being paid through an umbrella company because they are liable to pay it.

This means you can decide what’s best for you based on other factors – like efficiency, benefits and customer service (all areas where team green give the competition a run for their money, even if we do say so ourselves!)

Umbrella company FAQs – ask us anything!

If you are confused about any aspect of working through an umbrella company, this space is dedicated to the questions real contractors are asking.

Email us at hello@liquidfriday with “FAQ blog” in the subject line, and we’ll do our best to cover it in this series.