I have heard a lot of comments recently about the status of workers and as I engage quite a few small self-employed labourers, I would like to know if this has any impact for me.
Quite often businesses will engage a self-employed person rather than an employee due to the nature of the work or length of contracts and this does not give rise to any issues.
However, in some instances a business may use self-employed individuals on a long-term basis and by doing so this reduces the level of compliance, administration and employer obligations. Again, this may not give rise to any issues as the individuals involved may be genuinely self-employed.
In a small number of these cases, where an individual seems to be working only or mainly for one business, the tax authorities in both the UK and ROI can take the view that the individual is an employee rather than a self-employed person, and for these businesses simply hiring someone who claims to be self employed is not enough evidence to satisfy the tax authorities that employee taxes and obligations should not be operated.
If the employer wrongly determines the status of an individual the tax authorities will pursue the employer for the unpaid employer social security contributions, interest and penalties due and therefore this can create a financial problem for your business.
When carrying out a review of an agreement between you and each individual, some of the factors which are taken into account in deciding whether a worker is an employee or a self-employed contractor, include.
A self-employed (“SE”) individual normally uses his owns tools; entitlment to hourly/weekly pay, sick pay and holiday pay; financial risk, e.g. bad debts, unprofitable work; indemnity or public liability insurance; a SE individual may have agreed a fixed price per contract and raises invoices for services rendered; there may be a tender for work on a contract by contract basis and neither a SE individual or an employer is under an obligation to accept or offer work.
If you are unclear as to the status of an individual we recommend you seek specialist tax advice.
The advice in this column is specific to the facts surrounding the questions posed. Neither PKF-FPM nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.
Get in touch with Anne Rooney via email email@example.com