CIS subcontractor or PAYE

AskAsk

DullGreyGuy said:

AskAsk said:

Grumpy_chap said:

AskAsk said:

that makes sense as his hourly rate is £15 per hour, but from that is deducted employee NI and employer NI as well as the company's commision.

It seems as though your friend might well be better looking for alternative employment.  You have not said what type of role he works in, but as CIS is mentioned, I assumed a "trade" in which case the hourly rate of £15 seems to low - after deducting the Umbrella Company fee plus Employer's NI, the individual will be on barely NMW.  A Labourer would plausibly be on more.  The end-client seems to be taking advantage here.
In the meantime, the individual might want to use one of the online calculators to assess whether they are eligible for any benefits.

he got the work through an agency as a laborer.  they have told him this particular job pays £15 per hour but the payslip says otherwise as they have deducted the employer NI and their commission, so the pay is about £13 an hour.  Just a little more than minimum wage.

He is currently working as a laborer (non skill) for a buidling company who are building large houses in Surrey.  I do agree with you that the pay is poor for construction work in the south east so I will tell him that I do not think it is worthwhile messing around with changing to subcontractor status and just look for another job as he is clearly being ripped off here.

When I hear of people working through an umbrella company, they are often highly paid professionals so even with the deductions, they still end up with a large pay packet, but not when you are talking about £13 an hour.

Sounds like he has decided to go for an employee umbrella rather than CIS self employed umbrella hence why the employer taxes are being deducted. 

In the first instance have a look at the umbrella and see if they offer a CIS solution, its a little different to the employer umbrella world as its sold to the contractor rather than the sub-contractor.

Have they done the necessary registrations for self employment and CIS?

the payslip states CIS payment method but there is PAYE tax deducted so i am not sure what is going on.  he is not getting responses from the agency to his questions and they just send him the payslip again.

he has UTR code because he does self assessment for the rental income but not yet registered for subcontractor status.  do you need to register for self employment if you already do self asessment and have a UTR code?

AskAsk

Grumpy_chap said:

AskAsk said:

he got the work through an agency as a laborer.  they have told him this particular job pays £15 per hour but the payslip says otherwise as they have deducted the employer NI and their commission, so the pay is about £13 an hour.  Just a little more than minimum wage.

The real frightener here is that his actual pay might be below NMW, depending on how provision is being made (or not made) for covering holiday entitlement and other absences.

here is his first week's payslip as they pay weekly.  this one was before he queried about the employer NI deductions and asked if he could change to self employed status.  i haven't got a copy of the 3rd week's payslip, which he showed me with the CIS payment method in it, which I will get later and load it on here so you can see the difference, which doesn't look any different to this one!

Grumpy_chap

AskAsk said:

the payslip states CIS payment method but there is PAYE tax deducted so i am not sure what is going on.  he is not getting responses from the agency to his questions and they just send him the payslip again.

he has UTR code because he does self assessment for the rental income but not yet registered for subcontractor status.  do you need to register for self employment if you already do self asessment and have a UTR code?

Is he paid by the Agency, or by the Umbrella Company?
If he is paid by the UC, he will be an employee of the UC and self employment (sole trader) is not applicable.
If he is paid by the Agency, he may be and employee of the Agency, or may be self employed (sole trader) or may be required to be Owner-Director of his own Ltd Co. (which he would know he has set up, but many Agencies prefer this to sole trader).

AskAsk

Grumpy_chap said:

AskAsk said:

the payslip states CIS payment method but there is PAYE tax deducted so i am not sure what is going on.  he is not getting responses from the agency to his questions and they just send him the payslip again.

he has UTR code because he does self assessment for the rental income but not yet registered for subcontractor status.  do you need to register for self employment if you already do self asessment and have a UTR code?

Is he paid by the Agency, or by the Umbrella Company?
If he is paid by the UC, he will be an employee of the UC and self employment (sole trader) is not applicable.
If he is paid by the Agency, he may be and employee of the Agency, or may be self employed (sole trader) or may be required to be Owner-Director of his own Ltd Co. (which he would know he has set up, but many Agencies prefer this to sole trader).

he is paid by the umbrella company "XXXX- Limited" in the payslip posted as the Agency is "XXXX- Southamp" stated on the payslip.

so are you saying that he can't change to CIS subcontractor anyway if he is paid by the UC?

Grumpy_chap

AskAsk said:

here is his first week's payslip as they pay weekly.  this one was before he queried about the employer NI deductions and asked if he could change to self employed status.  i haven't got a copy of the 3rd week's payslip, which he showed me with the CIS payment method in it, which I will get later and load it on here so you can see the difference, which doesn't look any different to this one!

He is an employee of the Umbrella Company.

He worked 27 hours at a gross rate of £15 per hour, making a weekly total of £405.
The UC charge a fee of £15.  This is deducted first, leaving £390.
The £390 covers the following:
 - The employer's costs (apprenticeship levy plus employer's NI) on his total salary.
 - His salary at NMW
 - His accrued holiday pay @12.07% which has been added to his salary, so he will get zero pay when he is not working
 - The bit left over which is added to his salary as "bonus" (shown as "additional taxable wage")

From the three elements of salary (NMW plus holiday pay plus bonus) there are deductions of personal income tax plus employee's NI.

The item that appears to be missing is pension contributions - he may be below the threshold at which auto-enrolment applies.

AskAsk

Grumpy_chap said:

AskAsk said:

here is his first week's payslip as they pay weekly.  this one was before he queried about the employer NI deductions and asked if he could change to self employed status.  i haven't got a copy of the 3rd week's payslip, which he showed me with the CIS payment method in it, which I will get later and load it on here so you can see the difference, which doesn't look any different to this one!

He is an employee of the Umbrella Company.

He worked 27 hours at a gross rate of £15 per hour, making a weekly total of £405.
The UC charge a fee of £15.  This is deducted first, leaving £390.
The £390 covers the following:
 - The employer's costs (apprenticeship levy plus employer's NI) on his total salary.
 - His salary at NMW
 - His accrued holiday pay @12.07% which has been added to his salary, so he will get zero pay when he is not working
 - The bit left over which is added to his salary as "bonus" (shown as "additional taxable wage")

From the three elements of salary (NMW plus holiday pay plus bonus) there are deductions of personal income tax plus employee's NI.

The item that appears to be missing is pension contributions - he may be below the threshold at which auto-enrolment applies.

yeah, it works out to be about £13 per hour after the employer deductions from the start rate of £15 per hour.

can he change to CIS subcontractor with the UC?

Grumpy_chap

AskAsk said:

yeah, it works out to be about £13 per hour after the employer deductions from the start rate of £15 per hour.

can he change to CIS subcontractor with the UC?

What does his contract with the UC say?
What does his contract with the Agency say?
Will he be better off as CIS S/C?

The biggest issue here is quite likely whether the £15 per hour is the appropriate rate for an unskilled Labourer working on a contract basis with no security or "perks" of being an actual employee of the developer.

comeandgo

Employees should not be paying apprenticeship levy.

AskAsk

Grumpy_chap said:

AskAsk said:

yeah, it works out to be about £13 per hour after the employer deductions from the start rate of £15 per hour.

can he change to CIS subcontractor with the UC?

What does his contract with the UC say?
What does his contract with the Agency say?
Will he be better off as CIS S/C?

The biggest issue here is quite likely whether the £15 per hour is the appropriate rate for an unskilled Labourer working on a contract basis with no security or "perks" of being an actual employee of the developer.

he didn't receive any contracts i don't think but i will ask him.  it was just a text message from the agency to say the job pays £15 per hour and to call the agent if he wants the job.

when he got his first payslip, he was very shocked to see that it actually wasn't £15 an hour as there were deductions from it for the employer, the biggest of which is the employer NI.

yeah, it isn't a good job to be honest.  he is better off getting a job directly with the developer but they are getting cheap contract work through the agency.  he says that most of the people he works with have no idea what they need to do and the work is very shoddy, so the house they are building at the moment is a 5 bedroom house at 1.7m and it has already been sold off plan, so he pities the owner as they are going to find it is very substandard as the worksmanship is really poor because the developer is not employing the correct people because they are not paying enough to attract people with any skills.

EnPointe

comeandgo said:

Employees should not be paying apprenticeship levy.

he is employed  through  an Umbrella company  

 the  contractor pays the  umbrella company  the agreed gross   wage 

the umbrella company  *who is the employer*  pays the  employer  elements of  NI  and  things like the apprenticeship levy from that gross payment ... 

it's just that in a pure PAYE scenario  you  don't see things like apprentceship levy on the payslip  ( even though you might see  EmployeR Pension and NI   as well as EmployeE pension and NI  figures)