This one of the bigger issues affecting employers today. You need to take on a new person its cheaper to call them self employed saving national insurance and making them responsible for their own taxes. But are they really and will HMRC or an employment tribunal agree with you. Getting it wrong can result in substantial penalties getting it right at the outset will save a lot of time trouble. Current cases involving Uber drivers and bicycle couriers in London highlight issues.
To determine the status, consider if the individual is engaged under a contract for service or services.
To summarise the issues to support self employed status the contractor:
- Will provide services but may subcontract work
- Is free to accept or turn down work. The engager is under no obligation to offer any or further work
- Is likely to be in control of pace of work
- May subcontract work or bring in assistance
- Will normally supply all small tools and bring in or hire plant
- Quote on a job by job basis must rectify faults in own time
- Can profit from work done
- Can accept a fixed term contract
- Has no additional responsibilities or privileges although present on company premises
- Gains no employee benefits
- Can terminate if either side is in breach
To support employee status:
- Only provides personal services
- Employer is obliged to offer work and the employee is obliged to do as employer requires.
- Employer may control what how and when work is done
- Employee has no right of substitution
- Employer will provide plant and machinery
- Paid whatever work is done benefits from minimum wage and holiday entitlement.
- Employee can only benefit Only under a bonus scheme
- Employee is hired on a open ended agreement
- Capable of being promoted
- Can participate in pension scheme sick pay and enjoy family friendly policies
- Employee must normally give notice to terminate agreement
Other factors to support a self employed subcontractor
- Has other full time employees
- Rent workspace from 3rd party
- Has a website
- Has other clients
- Does his own billing
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