Always insist on a gross wage with your employer
Why are net-wage agreements still so common in domestic employment, especially when you bear in mind the financial implications at stake.
Many domestic employees and domestic agencies still discuss salaries in terms of net (i.e. take-home) and consequently many domestic workers have net-wage agreements with their employers. Although it is understandable that what you are ultimately interested in is how much money you have in your pocket at the end of each week or month, the reality is that you are always paid a gross wage, with tax and National Insurance Contributions paid to HMRC by your employer on your behalf. By insisting to discuss your salary in terms of net you could actually be doing yourself a disservice, as many employers end up considering the tax and NI contributions as additional costs, whereas they are actually part of your gross wage.
Domestic employment is most certainly the only profession left in the UK where wages are still commonly agreed on the basis of net (i.e. take-home) pay. It is surprising that this outdated arrangement has not yet been dispensed with, as there are considerable financial implications at stake. The following points briefly explain why a net pay agreement is disadvantageous to all domestic employees
- The Government regularly increases the personal tax-free allowances and has cut the basic rate of income tax several times in recent years. If you have a net pay deal your employer does not have to pass any of the savings on to you. Only if you are on a gross wage will you automatically receive the benefit of any cuts by paying less tax and NI
- A gross wage enables you to compare your salary with any other type of employee in the UK, thereby giving you an opportunity to assess your earning power and consider your career options.
- A gross wage agreement is also essential if you want a to get a personal loan or a mortgage, as the figure the bank or building society will be interested in is your gross salary. Similarly, if you want to make sure you are being paid the National Minimum Wage, you need to know what your gross salary is
- As long as net-wage agreements remain the norm the number of domestic workers with incorrectly declared salaries will continue to soar, and you will ultimately lose out as your statutory entitlements will be affected
information for domestic workers
There is a lot of confusion with regards to domestic employees and redundancy. Many people assume that because of the unique circumstances that exist between a domestic employee and their employer, they don’t qualify for redundancy pay. But providing they meet the requirements they are entitled to redundancy pay just like any other employee.
To qualify the employee must be 18 or over and have at least two years continuous employment. This means that they must have been working for the same household, without any breaks, apart from maternity, paternity, sickness and unpaid leave, for at least two years. They must also be working as an employee under an employment contract and have a PAYE scheme set up. This does not mean that they need to have a written contract, as some employers unfortunately don't provide this. They are still considered an employee working under a contract even if there is nothing in writing.
If an employer's circumstances change and they no longer have a full-time job to offer their employee and they want to employ someone on a part-time basis, the employer is required to first offer the "new" position to the existing employee. If they choose not to continue working for the employer under the new conditions they are still entitled to redundancy pay, unless they are on a fixed term contract.
The employee will also qualify for redundancy pay if their employer moves to a different part of the country, providing there is no relocation clause in the contract.
For current redundancy pay rates, please refer to the rates and thresholds page.
As long as the employee is on PAYE, they are legally entitled to these amounts; however, the employer is free to pay more than the statutory minimum at their discretion. The employer cannot claim any part of these costs back from the state. The employee does not have to pay tax on redundancy payments up to £30,000.
Please contact Stafftax if you wish to clarify any of the above points.