At the point when HMRC presented real-time information (RTI) highlighting payroll data the principles for temps were modified. Up to that point, HMRC had given the ease to managers to only make use of portions of PAYE rules for temps. This concession was removed with the exception of farmworkers. Obviously, this doesn't keep you from hiring temps yet it can lead to tax and NI issues where you decide to compensate them by cash-in-hand if you consent to pay an after-tax and NI sum.Tip. On the off chance that the temp isn't provided through a recruiting agency or another third party organization and completes the work on an independently employed basis, PAYE tax and NI become irrelevant on their compensation. Assuming you're going to do this, ensure you accept terms of work that don't hold you accountable for an employer-employee relationship because otherwise, HMRC can make you responsible for the PAYE duty and NI that should have been deducted from the temp’s compensation.
Compensating an employee, short-term or long-term, with cash implies you should calculate the amount of pre-tax and NI pay. As you've accepted a net compensation with the employee you need to take care of the expense for the tax and NI. This can be shockingly expensive.For instance let’s say XYZ LTD hires two temps for a period of 3 weeks, at £260 per week, for waiting tables. This doesn't give XYZ LTD enough time to deal with the tax paperwork prior to compensating the temps. As a matter of fact, it never gets the new starter checklist from the temps. Normally, the temps don't think of it as vital. Nonetheless, for XYZ LTD the outcome of not acquiring the checklist is more critical as shown by the data beneath.Per employee per week£Gross weekly pay342.00PAYE tax at 20%68.40NI at 13.25% on pay above £24213.25Worker’s net pay260.35Employers’ NI at 15.05% on pay over £17525.13Total tax and NI cost to XYZ LTD106.78
The complete value of tax and NI for the two temps for a three week period adds up to £640.70. It should be noted that this has boosted the cost of temporary seasonal employees by a whopping 41%. In the event that XYZ LTD had gotten the starter checklist from the temps the total cost would have moved down to just £139, consequently bringing down the general expense of the work to £1,753.Tip. Let temps know that they won’t be compensated unless they fill out and submit the starter checklist.Tip. An even easier solution is to not compensate temps on a net pay basis. Rather, decide on a gross salary so that the tax and NI are applied to them and not you.
