Why am I paying both the Employee’s National Insurance and Employer’s National Insurance?

When contractors first register with an umbrella company, one of the most commonly asked questions is: “Why am I paying both the Employee’s National Insurance and Employer’s National Insurance?”. Continue reading to find out more.

Why am I paying both the Employee’s National Insurance and Employers’ National Insurance?

The short answer is no; you are not paying both the Employee’s National Insurance and the Employer’s National Insurance. However, we will explain this in more detail below.

When you register with an umbrella company, the umbrella company becomes the employer, and you are the employee. By law, all employers must pay Employer’s National Insurance Contributions on the salaries paid to their employees.

However, in an umbrella arrangement, the employer (the umbrella company) doesn’t benefit from the work undertaken by the employee (the contractor) as the employee is conducting the work for a different company (the end hirer). The weekly or monthly margin, the only money an umbrella company makes, is not enough to pay for Employers’ National Insurance.

Therefore, the money to cover employment costs, such as Employers’ National Insurance, must come from somewhere. All compliant umbrella companies will only ever deduct employment costs from the rate charged by the umbrella company to the end client or recruitment agency – the assignment rate.

The assignment rate is the rate paid to the umbrella company by the end client or recruitment agency. It includes your gross rate of pay (the amount you are due to be paid before tax deductions) and an uplift to cover the employment costs. Therefore, the Employer’s National Insurance is deducted from the assignment rate, and the Employee’s National Insurance is deducted from the gross rate of pay. Employer’s National Insurance will never be deducted from your gross rate of pay.

Please visit the government’s website for more information about getting paid via an umbrella company.

Churchill Knight Umbrella is certified by SafeRec 

Churchill Knight Umbrella is a SafeRec Certified umbrella company, which means that every time we process a payment and issue a payslip to our employees, all payslips are audited, and all payments are cross-referenced with RTI sent to HMRC to check the payment is compliant and all the deductions are legal and as per UK tax law.

All employees of Churchill Knight Umbrella will be emailed a report each time they are paid, allowing them to check that all deductions, such as Employee’s National Insurance, are legitimate and correct and that there are no signs of malpractice or unlawful deductions.

Request a tailored take-home pay illustration

If you are interested in using an FCSA-accredited and SafeRec Certified umbrella company for your payroll, our expert Sales Consultants can provide a tailored take-home pay illustration and answer any questions about the deductions to your pay. For more information about our umbrella service, please call 01707 871622 or schedule a call for a time that suits you.