Figuring out tax deductions as a temporary worker is easier than it sounds

27 March 2023

Warehouse colleagues

As a temporary worker, it’s important to understand the tax rules that apply to your work. While you may not have the same tax obligations as a full-time employee, you still need to stay on top of your tax affairs to avoid penalties and ensure you’re claiming all the deductions you’re entitled to.

With the help of the employment service at Labour 24/7, temporary workers can find the best job opportunities and get the support they need to make the most of their earnings.

Working out pay for temporary and agency workers

Temping agencies can offer attractive pay and benefits, but it’s crucial to be aware of your rights as an agency worker and ensure you’re meeting your tax obligations. As a temp or agency worker, you’re employed by an agency and work under the direction of an employer on a day-to-day basis. This means that you’re not considered to be self-employed.

How is temporary worker tax calculated?

With the implementation of real-time information reporting, temporary and casual workers are now subject to full PAYE tax and National Insurance contributions. This can pose issues when cash-in-hand agreements are made, as the corresponding pre-tax and NI pay must be calculated by the employer.

Employers can also choose to have temporary workers complete and return a HMRC starter checklist before payment, or agree on a gross pay figure to avoid having to cover the tax and NI costs themselves.

Cash in hand work for temp workers

Getting paid cash in hand without tax and National Insurance deductions is illegal and could result in a loss of your usual employment rights, such as Jobseeker’s Allowance and sick pay. Additionally, you might have to repay the tax and National Insurance yourself, pay penalties, and face criminal charges.

If you suspect that your employer is paying you cash in hand to avoid tax and National Insurance, you can report it to HMRC confidentially.

Your rights as a temporary and agency worker

As a temp or agency worker, you are entitled to certain rights despite not being directly employed by the client company. Your agency is responsible for ensuring that you receive paid holiday days, minimum wage pay, Statutory Sick Pay (SSP), and parental leave (unpaid) with conditions.

You are also protected from discrimination on the basis of age, race, sexuality, and disability, and have access to workplace facilities such as the canteen or nursery.

After 12 weeks, you’re eligible for paid time off for antenatal appointments if you’re pregnant, and the same basic pay and working conditions as permanent staff doing comparable work.

Paying tax and national insurance on your wages as a temp or agency

If you’re earning over a certain amount and are below State Pension age, you’ll be required to pay National Insurance and income tax. If you work as an employee of an agency, they’ll deduct your tax and National Insurance through the PAYE system, including any Student Loan repayments you owe.

When you leave the agency, they must give you a P45 form to take to your next job, and if employed at the end of a tax year, you’ll receive a P60 form with details of your tax code and payments made.

Tax when you have more than one job

Juggling multiple jobs can increase your income, but it can also complicate your tax situation. To prevent overpaying or underpaying your taxes, it’s crucial to ensure you have the correct tax codes and that HMRC has accurate information about your employment.

Looking for consistent temporary work or workers for your company?

Labour 24/7 are here to streamline the process for you and help you hire the best temporary workers for your business. If you are looking for recruiters who specialise in the industrial or warehousing industry, it is the perfect time to get in touch with our team of experts now.