A Guide to Employer’s National Insurance Contributions in the Contractor Co-op
In the situation where you are a permanent employee, it is the company that employs you which is responsible for calculating and paying Employer’s National Insurance Contributions (NIC) on your employment income.
As an employee of an umbrella company like the Contractor Co-op the same rules apply and Employer’s NIC must be factored in to the amount paid to the Contractor Co-op for your services. This means the daily invoice rate advertised to you by your agency or end client is not the rate you will paid; it must be adjusted to allow for the payment of Employer’s NIC.
This rules are the same irrespective of
which payroll umbrella company you choose
What are the costs of Employer's NIC
Based on 2019/20 tax rates and allowances, Employer’s NIC are currently 13.8% of all earnings above £166 per week or £719 per month. So, ignoring any other costs associated with working through an umbrella company, such as their operating margin, this is the minimum uplift you would need to apply to permanent employee rates to maintain a similar level of net pay.
The effects of Employers NIC on your pay
To offset the costs of employment through the Contractor Co-op, we would recommend that you add 15% to the daily rate of a comparable permanent employee. Therefore, a contractor would need to negotiate a daily invoice rate of £230 in order to achieve a similar take home pay of a permanent employee who is paid £200 per day.
Employer’s NIC are one of the costs that ALL companies, not just umbrella companies, face in respect of their employees – this is not creative accounting, just companies meeting their statutory liabilities.