Umbrella co/SMP - help pretty please?!

[fantalemon]

Hello

This is a bit random/obscure but if anyone has any pearls of wisdom I would really appreciate it as just had a bit of a shock about how much SMP I can expect to get for the 6 week period at 90%.

I work on a temporary basis through an agency but get paid through an umbrella co. Its a bit complicated how my pay is worked out this week but goes a bit like this....

Say, for arguments sake, the number of hours I work in a week equates to £500 - the umbrella co then take off £24 for the privilege of paying me, a further amount in respect of employers NI, usually around £50 (I have to pay employers and employees NI...not sure why) and then any expenses I have submitted - I travel a long way so usually have at least £110 worth of train fares. So, once these deduction are taken off it leaves about £310 - this is called my "gross salary" by them and tax and ni (employees) is then taken off. I save a bit off income tax as they deduct my expenses first.

So far so good, but they have just written to me about my SMP. I knew I would be paid 6 weeks at 90% of my gross salary but assumed that would be 90% of £500 (given that is what I have "earned" in a week but turns out its 90% of £310.

THis just doesnt seem right to me particularly in relation to the expenses part. That is money that came out of my pocket and that I have not recovered (I just paid a bit less tax) yet the whole amount comes off my earnings for the purposes of SMP. So I am put in a worse position for having to travel to work.....If I had of known this, I Might not have put in for the expenses in the first place.

Does anyone know if this is right?

Thank you in advance

Sounds right to me.

You have to remember that the umbrella company is legally completely separate to you, otherwise you wouldn't be able to use it to reduce your tax bill. They are your employer. They are paid £500 per week for providing your services. That is their money, not yours. I know you earned it but that's the way it works.

They pay you £310 per week plus expenses. That is your salary. As they are your employer they also have to pay employer's NI contributions based on your £310 per week. Your own NI contributions are based on a salary of £310 per week. So that is the figure to use for calculating SMP.

Note, by the way, that your umbrella company will have to pay employer's NI contributions on your SMP.

Thanks v much for your reply. Just to clarify, should they have been paying employer's NI then because I have been paying this?

What I am struggling to get my head around is the fact that I am in effect receiving around £150 less smp a week (for 6 weeks) because I have had to pay travel which has come out of my own pocket. I have not been reimbursed by anyone just paid less tax as a result (about £40 less). I might as well not have claimed any expenses.....

Employer's NI is paid by them from the £500 a week they are paid for your services. So in effect you are paying employer's NI, yes. The umbrella company don't have to magic up the money from somewhere else (although they will have to for NI contributions while you are on SMP).

You haven't lost £150 per week for 6 weeks (i.e. £900) or anything like.

Even if you hadn't claimed travel expenses, the figure for your gross pay would have been £500 less your umbrella company's fee and employer's national insurance. So you have lost 90% of £110 per week, i.e. £99 per week for 6 weeks compared to what you might have got if you hadn't claimed travel expenses. That comes to a little under £600.

On the other hand if you had not claimed travel expenses you would have had to pay income tax, employer's NI and employee's NI on the additional £110 per week. That would have been over £50 per week extra you would have paid to the government. You would have had to avoid claiming for at least 8 weeks so you would have lost over £400 in order to gain a little under £600. So overall you have lost a little under £200, not £900.

Thank you - it's much clearer now although still a bit miffed I lose out on some smp. A lesson that I should have looked into this sooner!

Following on from the above thread (and prh47bridge if you are reading, thank you for your advice above and would be grateful for any further advice), I am now being paid SMP by my umbrella co but they are deducting £20 per week as an "administration fee".

I appreciate when I was working, submitting a timesheet etc my umbrella co deducted an admin fee but when they are simply processing a statutory payment this seems high especially when smp is only £130 odd a week.

Does anyone know if deducting an administration fee is legitimate in this way?

TIA