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 It is surprising that this outdated arrangement has not yet been dispensed with, as there are considerable financial implications at stake.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
When your employee is off sick for longer than three days you have the responsibility as their employer to administer Statutory Sick Pay (SSP) on their behalf. The first three consecutive days (excluding days not normally worked) of illness are known as 'waiting days' and any payment during this period is at your discretion. From the fourth consecutive day SSP can be paid instead of, or as a part of the normal rate of pay. Please refer to our Rates and Thresholds page for details of the current SSP rate.
Changes to the law from 6 April 2014
From the start of the tax year 2014/15, The Percentage Threshold Scheme (PTS) which allowed, in certain circumstances, employers to recover SSP has been abolished. Employers will no longer be to reclaim SSP although recovery of unclaimed SSP for previous tax years may be possible for a limited period. In replacement of the PTS, the government have announced they will be moving the funding into a new scheme as part of the cross-government Health, Work and Wellbeing Initiative. Under this new scheme, which is expected to launch in 2015, help will be made available to employees who have been incapacitated for four weeks or more, to get them back to work.
Introducing an incentive
Incentives are not a legal requirement but because many employers are dependent on their employees coming to work an increasing number now offer an incentive instead. An incentive can be a Friday afternoon off, a voucher or a meal at a local restaurant. If you decide to offer an incentive make sure you include the terms in the employment contract.