To employ or self employ? That is the question at this time of year, says Deborah Edwards, from Harland Accountants’ Newquay office
Looking out of our Newquay office window, it is evident that the summer season is in full swing.
For many local businesses this usually means taking on more staff and one of the questions that we are most frequently asked is, ‘should we take someone on a sub-contractual basis or should we employ them?’.
Whilst the thought of only having to pay someone for the time they are there and not having to deal with holiday pay or employers national insurance can be appealing, the ‘employed or self-employed’ decision will be determined by the arrangement you have with them and is not a choice.
As an employer it’s up to you to get it right or else you could be faced with backdated PAYE, NICs plus a penalty.
If the following applies they are likely to be an employee:
- You tell them what work to do and where, how and when to do it and you expect this work to be done only by them
- You contract them to work a set number of hours and pay them either a wage or a salary regardless of whether the work is available for them to do, with perhaps overtime or bonus Alternatively, someone who is self employed would be able or expected to do the following:
- Put in another suitable individual in their place
- Provide their own tools or assets needed for doing the job
- Put right any unsatisfactory work at no additional cost to you and in their own time
- You pay them an agreed price and they decide when and how to do the work
- Take the risk of making either a profit or loss whilst undertaking work for you
The seasonal workforce is frequently made up of full-time students on their summer break. The guidelines above are no different for them, however if you provide students with a Form P38(s) then you can ensure that their pay is treated correctly for tax and national insurance.
If after reading the above you still are not sure you can use HMRC’s online Employment Status Indicator, call your tax office or call an accountant to point you down the right path.
Other Useful Information
National Minimum Wage: 16 – 17 years old £3.57, 18 – 21 years old £4.83, over 22 years old £5.80 (All rates are set to increase in October 2010)
Holiday Entitlement: All full time employees are entitled to 5.6 weeks of paid holiday per year and this can include public and bank holidays. Part time workers are entitled to the same amount pro rata and any unused entitlement must be paid for when an employee leaves.
For seasonal businesses, this can have an impact on cash flow if all your staff leave at once.
Outsourcing your Payroll
Don’t let the thought of additional administration put you off making the right decision. Outsourcing your payroll can be an inexpensive and simple remedy and starts from only £19 per month. An accountant can help you keep a track of holidays taken and amounts owing, tell you how much PAYE and NIC’s are due to HMRC, calculate statutory sick pay and take care of the end of year filing.