After deducting a ‘margin’ to pay our costs (see ‘our charges’ below), this fund is used to pay:
- Your pension contributions if applicable (paid free of tax);
- Any other expenses (if allowable by HMRC) paid on your behalf by way of salary sacrifice (paid free of tax);
- Employer’s NIC on your salary, and
- Any other costs of employment that may arise.
The entire remainder of the fund is paid to you as salary.
This salary is paid in three parts:
- Basic pay for the hours worked, calculated at the national minimum wage rate. The use of national minimum wage is an expedient used by all umbrella companies which enables them to comply with all the legislation associated with flexible working. It does not affect the total amount paid to the employee.
- Holiday pay, also calculated at the national minimum wage rate. As you are an employee with flexible working arrangements, CUL is obliged to pay holiday pay, which may either be retained and paid to you when you are otherwise not working, or it may be ‘rolled up’ and paid to you month by month based on the number of days worked in the month. Although this method of payment is not favoured by HMRC, CUL’s policy is to ‘roll up’ holiday pay, and thus pay you the maximum funds available as early as possible.
- Bonus, which represents the entire remaining balance of all available funds.
This charge includes the cost of professional indemnity insurance (PI), employer’s liability insurance (EL) and public liability insurance (PL).
Please note that this margin is deducted from the fund paid to CUL for the work you have done on assignment. It is not a ‘charge’ directly to you and does not bear VAT, and is equivalent to £54.00 paid out of income taxed at 40%.
CUL administration costs include the following:
- PI insurance while you are on CUL assignments
- Employer’s liability insurance
- Public liability insurance
- ID and money laundering searches
- Issue of contracts
- Invoicing clients
- Vetting expense claims
- Payroll administration and preparation
- RTI submission and paying HMRC
- Pension administration
- HR support
- Employer’s NIC (to HMRC)
- Employer’s ‘automatic enrolment’ pension contribution (to NEST)
Certain expenses relating to you will be deducted from the fund and either paid out on your behalf or itemised separately on your payslip:
- Personal pension contributions – allowable by HMRC under a salary sacrifice scheme and paid out on your behalf.
- Childcare vouchers – allowable by HMRC under a salary sacrifice scheme and paid out on your behalf.
- Travel and subsistence expenses – if appropriate and if allowable free of tax – itemised separately on your payslip’
In order to comply with legislation in the most economic and beneficial way for you, and to pay you the maximum income as quickly as possible, your taxable salary will be paid in three parts:
- Basic salary – calculated at national minimum wage rate (2017/18 – £7.50 per hour) for each seven hour day worked, and
- Holiday pay – based on the number of days worked (calculated at national minimum wage rate).
- Bonus – which is the balance of the amount available.
This is calculated as 13.8% of monthly gross salary above £157.
Automatic enrolment pension contributions
CUL will be enrolled with the National Employment Savings Trust (NEST) for Auto Enrolment purposes. For 2017/18 the minimum total contribution is 2% of qualifying earnings, rising to 5% in 2018/19 and 8% thereafter.
Having been enrolled into the scheme, you do have the opportunity to opt out of the scheme during the first month of enrolment, in which case your first contribution will be refunded. NEST will write to you and tell you the deadline by which they have to be notified if you wish to opt out. You may cease membership of the scheme at any time after the first month, but NEST will not refund your contributions. It is therefore vital that you consider your options and make any decision within the required timeframe.
Travel and subsistence expenses
If you are working under IR35, you may still negotiate for CUL to charge the client for regular travel expenses, but these will be taxed in the same way as and together with the rest of your salary. Alternatively, of course, you may be able to increase your daily rate to compensate for not claiming expenses.
On the other hand, if you can demonstrate that your assignment does not come under IR35, that you are not working under the supervision, direction and control of your end-client, and that the assignment will not last for more than 24 months, and if the client accepts this, then you may be paid travel expenses without deduction of tax.
All claims for expenses other than travel and subsistence should be made directly to CUL and should be supported by relevant receipts. However, please be aware that CUL has a responsibility to ensure that all such expenses are incurred wholly, exclusively and necessarily for the business (ie they must be both reasonable and genuine).
Personal pension premiums
Contributions to a personal pension scheme may be paid by CUL directly to your chosen pension provider, by way of salary sacrifice, which means that you will not pay tax on these contributions. This is entirely at your discretion and by individual arrangement with CUL.
Maternity/paternity pay provision
Holiday pay provision
As an employee, you have a statutory right to maternity/paternity pay if the circumstances arise. This is mainly funded by the state, but it requires some advance planning, and if appropriate you should contact us as early as possible. Any employer liability would be paid out of your fund.
Holiday pay will paid out of your fund and will appear as a separate item on your payslip. The calculation is based on the number of days worked and calculated as 12.07% of your basic salary.