What is a Key Information Document (KID)?
A Key Information Document is a document that is provided to a Worker and is designed to provide transparency on how they will be paid, whether directly to their personal service company (PSC), via agency PAYE or via an umbrella employer. The KID should give the FL a brief overview of their pay over the course of an assignment, including all deductions.
This is what it looks like (typically three pages):
When should a Worker be issued a KID?
As of 6 April 2020, it is a legal requirement to issue a Worker with a KID before agreeing to contractual terms. Therefore, the KID should be one of the first documents the employment business supplies to the work-seeker.
It is not necessary to issue a revised KID every time a Worker begins a new assignment if there are no changes in the information recorded in the previous KID. However, the opposite is true when there is such a change.
What information should be included in the KID?
The title “Key Information Document” should be at the top of the first page
Statements immediately beneath the title that
The Key Information Document specifies key information which relates to the relationship between Worksome and the Worker and, where an umbrella company is involved, the person supplied to carry out the work
Where necessary, identifies documents where further information may be found
Includes contact details for Employment Agency Standards and informs the recipient they may be contacted if they are concerned that Worksome (or any other Employment Business) has committed a breach of the legislation.
A representative pay example.
Reflect a single pay period based on the intervals that payment will be made
Must include reasonably estimated numerical values
Sets out deductions item by item all deductions listed in the Key Information Document should be set out in the pay example
What if I am unhappy with the proposed deductions?
It could be good to know that some clients are willing to cover the cost of the employer's contributions and others are not - this will clearly show in your KID. If your client has decided they they will not cover employer's costs on top of your charged rate, then all costs (employment taxes, NIC's, pension, apprenticeship levy) to facilitate your payroll are taken from your Charge Rate.
If you are unhappy with the proposed deductions in your KID, you have the right to reject the KID. Kindly note that doing so will mean that you will not be able to accept the contract as it is. If this is the case we advise that you get in touch with your client to who may be able to make changes at their discretion.
Why can deductions vary from month to month?
The deductions showed in your KID is an example of deductions, but please note that deductions can vary from week to week and month to month and please bear in mind that all Tax and NI deductions are calculated automatically by the payroll software based on data provided by HMRC. This is caused by differing income levels for an employee from payslip to payslip, and that is regardless of whether they are paid monthly or weekly. This is because of the format all payroll calculations must take to understand how much tax is to be deducted and transferred to HMRC.
To expand, to calculate someone's tax liabilities, the calculation engines with take the income earned this period and multiply it out by the number of pay periods that year. E.g. someone earning £1K per month will be expected to earn £12k per annum. This figure will be used to understand how much tax should be deducted according to the annual tax bands, which in this case would be zero since earnings up to £12,570 are taxed at 0%.
However if a FL earns more in any given month, say £1750, then the next payroll calculation will anticipate the annual earnings to be £21,000. This means that £8,430 is taxed at 20%, which when divided back to a monthly figure will result in a tax take of 140.
To compound things the tax tables will take into account taxes paid already during this current financial year. In this instance if the FL was paid £1K for 5 months (no tax deducted) and then earns £1750 in month 6, the anticipated annual earnings would be (£1K x 5 + £1750) x 2 = £13,500. The first £12,570 is taxed at 0% and the remainder is taxed at 20%, meaning an expected annual tax take of £186. This would normally be divided by 12, to make it a monthly figure, but the tax calculators will realise that no tax has been paid for this entire year. Therefore half of £186 would be taken to combat that.
See an example of how the deductions in a KID turn into real deductions in a payslip from Worksome (and what the different fields means):
Please note that: If you have had previous bills processed by Worksome (either on the same contract or another contract via our platform), you might have another line called "Net pay already processed" in the Deductions box of your payslip. We will continuously process and pay out your payroll as the bills are submitted and if multiple bills are submitted within the same payment period, we will deduct already paid amounts to ensure correct processing of taxes and payouts.
Please reach out to us at email@example.com if you have any questions and we will be happy to help out!