confused by son's payslip - help !

[peridito]

Should change my name to clueless really .

He's just shown me his payslip - he;s employed by an agency as a supply teaching assistant .Pay is via an "umbrella " company rather than the agency .

payslip just shows the daily rate of £70 x 5 plus VAT £70 x 1 ,

There are no deductions for tax or NI . I guess as he's just started work that might explain the no tax but surely there should be deductions ?

He's going to ring them but I would like to have some understanding .
Anyone offer an idiot some advice ? It wasn't like this when I worked .

With VAT on there it looks more like a remittance, as though he's self employed. Defintely worth checking as 1 - if he's not vat registered he can't be paid it. And 2 - he will need to register self employed and complete a tax return if that's how they're processing him.

I suggest you read up about umbrella companies to help you understand:

www.nixonwilliams.com/our-services/guides-contracting-through-umbrella-company/simple-guide-how-umbrella-companies-work

www.itcontracting.com/comparison-umbrella-limited-company/

Depends his age and what he's earning

Oh blimey ,thank you both for such speedy replies .

Q yes I believe it does say remittance - will go and check .
He's not VAT registered ,why would they assume he is ?Is he supposed to be ?

Is it complicated to register as self employed ? How is it done ?

Hundred - thank you for the links .So my son is the contractor ,is that right ?

Shouldn't there be a deduction for NI ?

Sometimes agencies employee people as self employed /companies. It's a fairly common practice. I would usually have been mentioned when discussing pay, though.

*it

If he is self employed he has to arrange to pay his own tax and National Insurance- unless the umbrella company is sorting that out for him

Thank you .

Son insists he queried whether he'd be classed as self employed and that he was told no .

But ...maybe he's mistaken .

He isn't mistaken. He isn't self-employed, he's an employee of the umbrella company.

Is it a payslip he's got or is it an invoice for his services? (It sounds more like an invoice i.e. the umbrella company invoices the school for his days worked hence the day rate plus VAT, but he receives a payslip from the umbrella company showing his gross and net pay plus deductions etc).

Some umbrella companies are a bit dodgy. They seemed to have died a death a few years ago but now with the enforcing of IR35, umbrella companies seem to be popping up more as running your own limited company as a contractor is less tax efficient than it used to be. Suggest you Google his umbrella company and see what reviews they have just to be on the safe side.

This is an extract from the net that may help you and your son know what to ask his umbrella company:

Umbrella companies – sorting the wheat from the chaff

All of this begs the question: how can contractors spot a so-called ‘dodgy’ umbrella scheme? Also, what is the best way of identifying a trustworthy, reputable umbrella company that has contractors’ best interests at heart?

Here are three top tips:

Check the umbrella’s accreditation record – ask if the umbrella solution has been certified as compliant by the FCSA. If it has, that proves that it complies with the FCSA’s strict code of conduct – a good indication that the company does everything by the book.

Beware promises that sound too good to be true – Some unscrupulous umbrellas tell contractors that they will be able to take home as much as 90% of their gross pay. This is simply not possible if the umbrella is adhering to HMRC rules.

Look for reviews – search online to see what other contractors have said about the provider in question.

Hundred ,thank you so much .

I'll do some research on the particular umbrella co .

for now I think I've managed to save a copy of the remittance advice and attached ,

Oh dear ,that's probably not readable . Sorry .Ho hum .

Umbrella company pay slips can be impossible to understand. DP has worked in the construction industry on and off and for a while it was all agency work and umbrella companies, which are likely to be connected to each other, even if they presented as different companies. It was always 'you are required to sign up with an umbrella company, here's our recommendation'. Sounds like supply teaching is the same.

Thankfully, they seem to have stopped this now in the construction industry and the odd contract he has done has been via the construction industry scheme, which seems much fairer to the worker.

With the umbrella companies it was always 'come and drive a digger on this building site for £14 an hour' but when he got his pay slip, it would be a baffling combination of NMW, expenses, bonuses etc and they always deducted charges for using the umbrella company and Employer's NI, as well as employee's NI and tax.

It was all a tax avoidance scam, and maybe they've been told to stop by HMRC. I was always worried because we never knew what to put on his tax return (he did a variety of employed and self employed work) and there were always stories of HMRC coming after builders, as well as lorry drivers who were forced to work in this way - this is often the only way you can get a job in these industries if don't run your own actual business eg a builder who does extensions.

I have such a blind spot about this

So ..we have a school ,an employment agency ,an umbrella company ,and my son /the contractor

employment agency matches son and school but use umbrella co to employ son and pay him

school pays agency

agency pays umbrella co ??

umbrella co pays son ( and will send son a payslip though haven't done so yet as son only been there 2 or 3 weeks / )

son gets copy of remittance advice ie document from agency to umbrella company detailing agency payment to umbrella co in respect of son/contractor XYZ

the remittance advice seems to be on agency "headed notepaper " in that the agency's name and address is at the top and the umbrella company's name and address is in a little panel at the bottom .So from the agency to the umbrella co .

is this right ?

Can he opt out?
I know two people working for the same agency. One opted out of the umbrella company, one didn't. The one who didn't receives much less money per week but didn't seem to know why. She's in the process of querying this. There seems to be all sorts of deductions. The one who opted out has to fill in a self assessment form for taxation purposes but it seems much more straightforward. Not sure about her National Insurance though.

Snewname good point.

I think when he joined this agency he was given a choice .It seems he felt it would be far too complicated for him to meet responsibilties of being self emloyed and he chose the umbrella company .

But I bet when he does receive a payslip he's going to see lots of deductions .Which might motivate him to step up to the plate .

Registering as self employed and undergoing self assessment really isn't difficult at all.

You can work out your income by looking at your bank account, and you just need to keep a list of mileage undertaken and other expenses to deduct.

Maybe read the information about 'self employment for beginneers on the HMRC and other websites. Much better than being ripped off by umbrella companies who charge a fortune for very little.

Thank you Barbara .I'm beginning to see the light ,the umbrella company will of course want their services paying for ,along with the agency .

I'm so glad I came on here to ask ,MN is so good at this .

So many people who are knowledgeable and helpful .

I'm actually a little worried by how dependent I am on it !

Your son will pay a fee to the umbrella company, but the agency will take their cut from the school rather than your son.

I'd advise against him being self-employed as it raises liability issues and it sounds like he's very new to this so he'd be better off keeping things simple. His options are:

1. Stay with his current umbrella company (you need to check they're reputable though - as covered in my earlier posts)
2. Change to a reputable umbrella company (yes, they do exist. Googe is your friend).
3. Set up his own limited company. This is most tax efficient but given his low day rate, it probably isn't worth it unless the umbrella company is charging him huge fees. He'd need to do his own accounting or pay an accountant to do it for him (they will also set his company up if required). Again, I don't really think he's earning enough to justify it but your/his call. It will be cheaper than using an umbrella company if he shops around. (I can recommend danbro.co.uk if you need an accounting firm that specialises in contractors). It would give you/him some control back but he doesn't sound that way inclined given that he seems to have taken the path of least resistance so far and hasn't done any research into contracting/umbrella companies etc.

As an aside, Churchill Knight don't get the best reviews online but the reviews seem to be more about their accounting services (to limited company contractors) than their umbrella company. Doesn't sound great though if they make errors and their communication is slow:

forums.contractoruk.com/accounting-legal/5771-churchill-knight-associates-ltd.html

Thank you so much Hundred .He has spoken to the umbrella co this evening and has decided to stay with them .

but I'm saving your post for future reference .

I did look at Churchill Knight reviews and like you ,thought that there wasn't criticism about the pay roll stuff .

I am so grateful for your detailed posts and for the time you ( and others ) have taken to answer my query .

You're very welcome!