Employing new staff

Employee self employed?

One of the decisions a business has to make is whether or not specific individuals are actually employees. This may sound like an easy question but it’s not as straight forward as it sounds. It is quite common for a business to treat someone who works for them or on their behalf as self – employed or as a freelance subcontractor. The reason being that it has many tax advantages, however, this can be a dangerous thing to do and should not be entered into lightly.

Unfortunately employment status is not a matter of personal preference but is based on the relationship between worker and employer. If you treat someone as self – employed who qualifies as an employee you run the risk of running up a sizeable tax and national insurance liability, plus the possibility of interest and penalties.

Whether someone is employed or self – employed requires a review of a considerable number of factors relating to their working relationship with you and your business. The guidelines from HM Revenue and Customs website should help you make that decision but some of the main points are:

Employed Self- employed
  • Has to do the work set themselves
  • Told what, where and how
  • Paid by the hour week or month
  • Can receive overtime or bonuses
  • Does set hours for the business
  • Can hire someone to do work or assist at their expense
  • Personally decides what work to do & how & when to do it
  • Paid only for the work they do
  • Is paid a fixed agreed fee for work required
  • Regularly works for a number of different organisations

If you are still unsure then it is best to seek specialist advice or treat them as an employee to err on the side of caution.

If you do decide that someone is self – employed then at the very least you need to be able to show during an inspection from HMRC that you have reviewed all the facts and made a reasoned and carefully argued decision as to why that person is self – employed.

Once you decide that someone is in fact an employee there are further decisions and actions to take.

Contract employment?

Some aspects of contract employment:

  • Brief description of work to be carried out
  • Salary
  • Place of work
  • Hours
  • Holiday entitlement
  • Pensions
  • Sickness rules
  • Notice period
  • Disciplinary procedures

If you require any assistance regarding contract we find that ACAS provide an extremely useful service. They have a free helpline which you can call for advice and if you access their page online there is a downloadable basic contract of employment which should be sufficient for most of your needs. It’s also a Word document, so it can be easily tailored to suit what you want.

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