Split week working
If two or more households share a domestic employee it is advisable for each household to set up their own separate PAYE scheme as this will result in a considerable saving in National Insurance Contributions (NICs) for each party - without adversely affecting the employee.
Usually, the first (or main) employer applies the employee’s full personal tax-free allowance (currently £100 per week for a single person on a standard tax code) as well as the lower rate (10%) tax band to a part of the wage. The second employer then applies the basic rate of income tax (currently 22% of gross income) to all earnings in their employment.
But many domestic employers agree a net salary with their staff. This means that if a first (or main) employer is using all of their employee's personal tax free allowance, the second employer, paying an agreed net, will end up paying substantially more tax, having to pay basic rate tax (at 22%) from the first penny the employee earns.
Therefore all employers are advised to agree their employee's pay on a gross basis. Even if an employee takes home proportionally more from their first employer than their second, they should be made aware that they are being taxed correctly, if unequally, over both sources of income. Neither employer is out of pocket when paying an agreed gross wage.
Agreeing a net wage is highly inadvisable as it makes an employer liable to potentially unlimited amounts of top-up tax and NI whenever the rates for these are increased, and severely disadvantages a second employer when the first employer is already applying an employee’s full tax code.
Even when a fixed net wage has been agreed it is better for one employer to use their employee's entire tax code and to privately agree an adjustment in total cost between the first and second employer, to ensure that neither is unfairly out of pocket, when paying the share of both tax and NI, rather than to apply to the tax office to split her tax code. It is possible for two employers to split their employee's tax code between them so that each employer has the benefit of part of their employee's personal tax-free allowance. But tax code splits are an inadvisable way of balancing pay between two jobs, as they require the prior consent of both employers and their staff, can involve considerable delays to be authorised by HMRC and are normally not applicable retrospectively.