As we all know if we are residing and working in the UK, the companies with whom you are associated as a worker tend to pay the employer’s national insurance contributions. However, in such a case where you are being paid by an umbrella company or PAYE by a recruitment agency, you will be paid by the same company. One of the most frequently enquired points, in this case, is what is HMRC payment NIERS on my slip and what is this deduction all about?
In case you are getting your pay from an umbrella company or through the limited company payroll, most employees are confused about this deduction on their payslips. Further in this blog, you will get to know the explanation of NIERS introduction, if it’s applicable if you are getting your payment through an umbrella company, and why it seems like your rates are increased.
What is HMRC Payment NIERS on Payslip
A simple put about the question of what NIERS stands for is Employer’s National Insurance Contribution. In the United Kingdom, employers are liable to make their contribution to the national insurance on the earnings of their employees. Normally, it is considered a class 1 secondary contribution as well.
There is a specific rate for NIERS to get the computing process done, it has to be followed to ensure seamless processing. As it will save your time and energy. In case your weekly earnings is exceeding the limit, NIERS is normally payable in such a case.
Furthermore, in the case you are getting your earnings through an umbrella company by using the payroll system of the company directly, you will experience the deductions on your payslip as well. This happens because of the reason that the company has to operate PAYE and pay the national insurance contribution as an employer for your earnings.
How Is NIERS Calculated?
If you take an example of a contractor who is working off the payroll. He is getting his earnings directly through an agency. The PAYE rate he is getting is £600 for one day. Now consider the contractor is willing to work five days a week, the gross amount he will earn is £3,000. Which is a result of £600 x 5 days.
Now on this weekly gross earning, the employer’s national insurance contribution will be £170 every week, consider deducting the second threshold amount. The computation of NIERS will be as follows:
Weekly Gross earnings = £3,000
Less – Secondary Threshold = £170
Pay Subject to NIERS = £2830
I’m Paid via An Umbrella Company – Is NIERS Applicable?
Now you must be wondering if you are getting your payment through an umbrella company. As you know, the umbrella companies in the role of an employer are liable to take the responsibility of paying the employer’s national insurance contribution and PAYE on your earnings.
As a result of this, the agency and umbrella company both have to take responsibility for the Employer’s National Insurance Contributions. So you need to worry whether you are associated with an umbrella company or an agency, they will be obliged to pay their part of NIC as your employer.
Moved to Umbrella provider – Are your Rates Increased?
Several people are confused if NIERS can affect their rates that are not the case at all. In the agreed rates of the contractor, the National Insurance Employers Contribution and other costs are involved. These are known as assignment rates. The umbrella company is liable to pay the employer’s national insurance contribution on the behalf of a contractor.
You need to know that once the agencies and umbrella companies agree on the rates, they consider the specific deductions in the agreed rates as well. This is because they have to ensure a seamless and error-free process NIERS contributions and pay HMRC as well.
Now in case, you have recently switched to an umbrella company. What new you might experience is the rate seems to be increased suddenly. The reason behind this is that the agency gives the same information to the umbrella company and now the umbrella company is liable to handle the NIERS and other such payments.
You should keep the knowledge of the difference between the assignment rates and the PAYE rate to keep check that you are being paid the right amount that you deserve.
The Bottom Line
Now that you have gathered a fair amount of information about HMRC payment NIERS. We can bring the discussion toward wrapping up by saying that several contractors do not have an understanding of NIERS. This becomes the reason that they are permitting the wrong deductions from their earnings. The employer might take the benefit of you being unaware of the rates. You need to be aware that the agencies and the umbrella companies are legally liable to pay the employer’s national insurance contribution on your behalf.
We hope these few minutes of reading will help you to be aware of the right amount of deductions on your payslip and your lawful right regarding this. You must seek professional help in case you still do not have a clear mind about these details.
This is why we recommend speaking to one of the most professional team members at Accotax if you are stuck with the understanding of your rates.
Disclaimer: The information provided in this blog about HMRC payment NIERS includes its text and graphics in general. This does not intend to disregard any of the professional advice.