The UK based firms whether small or large are obliged to pay Employer’s National Insurance Contributions. If you’re a contractor who is working with a recruitment agency or an umbrella company and getting paid through PAYE, the Employer’s National Insurance will be paid by them.
NIERS stands for National Insurance Employer’s Contribution. It is ordinarily known as Class 1 Secondary contributions. Employers usually pay NICs on the salary of their employees. NIERS are assessed at a 13.8% rate (for 2021/22) and are owed on earnings more than or equal to £170/week (for 2021/22).
When you see the deduction of NIERS on your salary slip then remember that it has happened because your employer is bound to pay PAYE and NIC.
Does NIERS have an impact on your pay rate?
Well, the short answer is NO, it would not. Managing extra overhead, the NICs and other charges are calculated within the contractor’s agreed pay rate, which is also known as the ‘assignment rate.’
Recruitment and umbrella agencies will in general incorporate this allowance into their computations when setting the contractor’s pay rate since they need to guarantee the NIERS commitment is kept down to pay HMRC.
Rate increase due to NIERS
After joining an umbrella company, you may see some hike in your pay rate. It happens due to the agency transferring this rate increase to the Umbrella company who are liable to submit NICs from your account.
This implies that agencies are presently not answerable for paying NIERS. These obligations have now been disregarded by the Umbrella since they are currently viewed as the employer. To oblige this, the National Insurance Employers Contribution is put into the contractor’s PAYE rate.
The distinction between the agency PAYE rate and the rate you get when working with an Umbrella works out to around a 13.5% increase. Always, remember this is the NIERS which all contractors are legitimately obliged to pay.
This is sometimes a petulant subject as it causes the Umbrella to seem like the villain, parting with a contractor’s well-deserved cash. But, NICs are constantly given. It's simply that the Umbrella is more straightforward with showing the deductions and subsequently showing you where your money is going.
Controversy behind NIERS
Several contractors most of the time don’t directly comprehend what NIERS actually is, and they think that NIERS is getting subtracted from their net pay, wrongly or even illegally. But they should remember that NIERS is an obligation of an umbrella company.
Obviously, there might be unlawful employers, however, umbrella and agencies are not for the most part making unlawful moves. Guaranteeing you meet the right and HMRC compliant agencies and bonafide umbrella companies will normally shield you from any unlawful action.
To enhance your odds of keeping away from frightful amazements and to guarantee you comprehend your payslip, contractors should demand getting a Key Information Document (KID) from their respective employers.
How can Reliasys help?
At Reliasys, we offer Full employment rights/Statutory Benefits, Perks, Insurance and more to all the contractors working under it.
Contact our experts to know more!
020 3500 2615