The amount shown as Gross Payment on your payslip is based upon the minimum wage/living wage portion of your earnings, allowing for the statutory deduction of pension contributions.
These are shown as one figure on your payslip. Chargeable expenses are any costs that your agency or client has agreed to reimburse to you. Chargeable expenses will usually be invoiced through Contractor Umbrella and may well require an expense form, signed by the client, to support the claim.
From the contract value, we deduct the gross payment and expenses as described above. The balance is subject to Employers National Insurance and Employers Pension, once that deduction has been made the residual amount is treated as a bonus payment.
Employment law requires employees to receive a certain amount of paid holiday leave a year. In order to be able to comply, we make a deduction from each payment at 12.07% of your taxable salary; this is dependent on the period being paid (weekly or multiples of, or monthly). This deduction is either paid straight back to you within your weekly or monthly pay, or if requested, we will accrue this throughout the financial year. Via the portal, if opting to accrue holiday, you will be able to see the amount in the pot and reclaim this when you decide to take annual leave.
Should you leave the company, any holiday deducted but not repaid for holiday leave taken, will be paid back to you with your final timesheet, or at the end of the holiday year (March).
PAYE TAX & TAX CODES
The PAYE Tax shown on your payslip is the income tax we are required to deduct from you and pay to the government. The amount deducted is based on the tax code operated which will have either been advised to us by the tax office, or, if you are a new contractor, via your P45 or HMRC Starter Checklist form. Your tax code is shown in the bottom left hand corner of your payslip. If you believe your code is wrong, please contact HMRC to request a revised coding. You will need to have your NI number and our Employer Reference Number (419/GZ23909) handy when calling. They are contactable on 0300 200 3300.
EMPLOYEE NATIONAL INSURANCE
Legislation requires all employees to pay a national insurance contribution based on their earning (unless they are exempt by virtue of being over retirement age and have provided us with the required evidence). This is shown on your payslip as EEs National Insurance.
ER’s NATIONAL INSURANCE
All UK employers, including umbrella companies, are required to make payments each month to Her Majesty’s Revenue and Customs (HMRC) for Employers’ National Insurance Contributions. Currently this contribution is taken as a percentage of 13.8% of earnings over £162 per week.
As of April 2017, we are also required to make payment for the Apprenticeship Levy to HMRC. The Levy is taken as 0.5% of earnings subject to Class 1 Secondary NICS. You are our employee which means that you are paid through PAYE (Pay As You Earn) and your salary is linked to the rate, which is agreed in the contract between Contractor Umbrella Ltd and the relevant recruitment agency or client. We raise an invoice to the agency/client for hours worked at the contract rate; from this we retain a margin (currently £29.50 per week or £108.50 per month) and we make a payment to HMRC for Employment Taxes. The remainder is paid to you as a salary, which is then subject to deductions for income tax and Employee’s National Insurance contributions and we will pay this to HMRC along with your PAYE tax and employee’s NI.
Employment law requires employees to receive a minimum amount of pay for each hour worked. The rate is usually revised annually; we base our minimum wage rates upon the London Living Wage. If you submit a timesheet to us showing hours you have worked but we do not receive payment from your agency before the end of the month, we will make a Minimum Wage payment to you. This will be based on the hours submitted and the prevailing minimum wage rate. When we finally receive payment from the agency, we will pay you the balance of what is due.
Our system allows us to make multiple payments to you in one tax period withou having to apply a rollback (as detailed below). The correct tax deductions will be calculated and the remaining funds will be processed to you as if you were recieving one payment in the period.
Sometimes it is necessary for us to roll back (reverse) your last payment. This will usually be because we receive funds for another timesheet within the same payroll period as one that has already been paid. The PAYE system only allows for one payment to be made each week/month, therefore if we receive 2 payments from your agency/client within the same payroll period, the first has to be cancelled from our payroll system (this is referred to as a ‘roll-back’) so that we can process the two payments as one. The total of both payments are added together and resubmitted through payroll so that the correct PAYE tax and national insurance (NI) contributions are calculated on the overall payment. The new payslip that we send you will replace the first payslip. As a physical payment will have been made to you when we processed the first invoice we will show a deduction for the net figure paid called ‘Already Paid’ to arrive at the amount that will be paid into your bank account for the second invoice. Most employees have a tax-free allowance, which is based on their tax code, and this is divided by the number of weeks or months in the tax year and a proportion applied to each payment. Only one tax-free allowance can be applied in each payroll period. Please note that as your tax free allowance for the period will have been used against the first payment you will find that the overall percentage of PAYE tax and NI deducted against the second payment will be higher as the full amount will be subject to tax and NI.