Putting a subcontractor on payroll

[oldgeebee]

We’re a start-up with 2 directors and pay a sub-contractor for Project Management Services. We have a contract to complete that specifically excludes our use of sub-contractors. If we hire him on a part-time, fixed term contract would he still be able to operate as a sole trader to do sub-contract work for other companies?

[Eric Mc]

What does the contract define as a "sub-contractor"? Does it specifically state that only "employees" can be used?

[KevinCamaroSS]

oldgeebee said:

If we hire him on a part-time, fixed term contract would he still be able to operate as a sole trader to do sub-contract work for other companies?

It would if that is what you wrote into your contract with him.

[oldgeebee]

Eric Mc said:

What does the contract define as a "sub-contractor"? Does it specifically state that only "employees" can be used?

It explicitly states that we are not allowed to sub-contract the work. We take this to mean “only employees”.

[oldgeebee]

KevinCamaroSS said:

It would if that is what you wrote into your contract with him.

So he’s not going to end up in trouble with HMRC if we design his terms of employment to allow him to work for others?

[oldgeebee]

KevinCamaroSS said:

It would if that is what you wrote into your contract with him.

So he’s not going to end up in trouble with HMRC if we design his terms of employment to allow him to work for others?

[sgrimshaw]

oldgeebee said:

So he’s not going to end up in trouble with HMRC if we design his terms of employment to allow him to work for others?

No.

[Eric Mc]

oldgeebee said:

Eric Mc said:

What does the contract define as a "sub-contractor"? Does it specifically state that only "employees" can be used?

It explicitly states that we are not allowed to sub-contract the work. We take this to mean “only employees”.

That's pretty black and white I would suggest.

You need to out the individual on the payroll and offer him/her an employment contract.

[Trophy Husband]

Eric Mc said:

oldgeebee said:

Eric Mc said:

What does the contract define as a "sub-contractor"? Does it specifically state that only "employees" can be used?

It explicitly states that we are not allowed to sub-contract the work. We take this to mean “only employees”.

That's pretty black and white I would suggest.

You need to out the individual on the payroll and offer him/her an employment contract.

We get this a lot in construction. Essentially the principal does not want you passing the job on to another similar company to yourselves. I'm assuming you have been through some kind of pre-qual with the client although I'm not sure of your industry? In my game it is a reference to management structure and that it is OUR structure that the client has approved for the work. We employ sub-contractors in many scenarios but they work under the aegis of our business. A client does not want to be reviewing a third party for compliance ie. insurances, competencies etc. If the sub-contractor is working within your own systems I don't see a problem and have never had on to date.

[Eric Mc]

That's why I asked by "what do they mean by sub-contractor?".

It can be a pretty vague term and one person's interpretation of it may not be the same as another.

[oldgeebee]

Thanks to all for your input. This is R&D and our client is an institution. We need to sign a Collaboration Agreement which states that we can only delegate work within our company. We’ve discussed this a couple of times with the client and it seems there’s no wiggle room - the PM needs to be on our payroll.
If we can offer a part-time, fixed length contract specifically allowing him to work for others and that won’t lead to problems for him regarding HMRC the we’re happy to go with that (and that’s the message I’m getting from your replies).
Thanks again.