Sub-contractor or employee?
Discussion
If I used the services of a mechanic/recovery driver on an ad hoc basis not at set hours and not regularly would it be considered employment? Due to the nature of our business, many competitors use the services of sub-contractors such as ex-employees to provide holiday/sickness cover.
At what stage would a sub-contractor be deemed an employee? I suspect it is the regularity of work and so on?
With kind regards
Amar
At what stage would a sub-contractor be deemed an employee? I suspect it is the regularity of work and so on?
With kind regards
Amar
If he is already set up as mechanic running his own trading business then there would be no problem i.e. he has his own trading premises, he uses his own equipment, he has mutiple customers of his own etc etc.
The number of times you make use of him does not, in itself, point to employment or self-employment.
The number of times you make use of him does not, in itself, point to employment or self-employment.
Edited by Eric Mc on Friday 2nd January 11:43
Being self-employed, by definition, implies you are running a business.
If he works for other businesses in a self-employed capacity, that means he is genuinely trading.
If he works for other businesses as an employee in each of those business (not likely, to be honest), then working for you would mean most likely that you would need to put him on the payroll as a part time employee.
The Revenue will tell you that no one has a "choice" in "deciding" to be classified as an "employee" or as someone who is "self-employed". The facts of the situation will determine what the individual's status is.
It is unfortunate that the Revenue use the term "self-employed" as it tends to confuse the issue somewhat. The legal term is actually "trading on one's own account". For someone to be able to be treated as being a self-employed individual, they need to demonstrate that they are "trading on their own account".
If he works for other businesses in a self-employed capacity, that means he is genuinely trading.
If he works for other businesses as an employee in each of those business (not likely, to be honest), then working for you would mean most likely that you would need to put him on the payroll as a part time employee.
The Revenue will tell you that no one has a "choice" in "deciding" to be classified as an "employee" or as someone who is "self-employed". The facts of the situation will determine what the individual's status is.
It is unfortunate that the Revenue use the term "self-employed" as it tends to confuse the issue somewhat. The legal term is actually "trading on one's own account". For someone to be able to be treated as being a self-employed individual, they need to demonstrate that they are "trading on their own account".
The inland revenue deem a self employed person to be employed when they work predominantly for one company, using the tools and facilities provided by that organisation. So if I spend 16 hours (which is the Benefits system definition of FULL time) at your site using your computer, or your machine, and 30 hours at 5 other companies and I get paid by the hour, the inland revenue would consider that I am employed by you. If he is paid by the job, and brings his own tools, is the owner of a Ltd company and employs staff to do the job when he's unavaliable then he's not employed by you.
Mr POD said:
The inland revenue deem a self employed person to be employed when they work predominantly for one company, using the tools and facilities provided by that organisation. So if I spend 16 hours (which is the Benefits system definition of FULL time) at your site using your computer, or your machine, and 30 hours at 5 other companies and I get paid by the hour, the inland revenue would consider that I am employed by you. If he is paid by the job, and brings his own tools, is the owner of a Ltd company and employs staff to do the job when he's unavaliable then he's not employed by you.
Unfortunately, matters are by no means as clear cut as this. The figures you are quoting would only be guidelines used by the Revenue in helping them form an opinion as whether someone is a bona-fide trader or an employee and could be challenged.The limited company issue is of no relevance whatsoever when considering an INDIVIDUAL'S employee/self-employed status.
Eric Mc said:
Mr POD said:
The inland revenue deem a self employed person to be employed when they work predominantly for one company, using the tools and facilities provided by that organisation. So if I spend 16 hours (which is the Benefits system definition of FULL time) at your site using your computer, or your machine, and 30 hours at 5 other companies and I get paid by the hour, the inland revenue would consider that I am employed by you. If he is paid by the job, and brings his own tools, is the owner of a Ltd company and employs staff to do the job when he's unavaliable then he's not employed by you.
Unfortunately, matters are by no means as clear cut as this. The figures you are quoting would only be guidelines used by the Revenue in helping them form an opinion as whether someone is a bona-fide trader or an employee and could be challenged.The limited company issue is of no relevance whatsoever when considering an INDIVIDUAL'S employee/self-employed status.
HMRC web site includes some of the factors they take into account, like the ability to themselves pass the work to others (ie they can sub-contract it or get someone else to do bits), right to refuse work, provide their own tools and carry financial risk etc.
One of my 'self employed' people also worked for someone who the HMRC have taken to task on the issue. They had been providing a pool car rather than pay the private mileage at 40p a mile and most of the people, who were mainly retired from the police service, only did this one thing to supplement their pension.
They agreed that in future they would be 'employees' but the boss felt lucky that HMRC gave him this chance and didn't come after him for all the PAYE/NI.
One of my 'self employed' people also worked for someone who the HMRC have taken to task on the issue. They had been providing a pool car rather than pay the private mileage at 40p a mile and most of the people, who were mainly retired from the police service, only did this one thing to supplement their pension.
They agreed that in future they would be 'employees' but the boss felt lucky that HMRC gave him this chance and didn't come after him for all the PAYE/NI.
The Revenue like to keep their options open.
The key to determining whether an INDIVIDUAL is running a genuine business is that they are able to exhibit some or all of what a judge many years ago referred to as "the badges of trade".
These are:
Badges of Trade -Indicative of Self Employmen
Right of control
You have the right to decide how, when and by whom a job is done. Can send substitute to do job.
Basis of remuneration
Remunerated on a project basis, or at a fixed price.
Tools of trade
You supply large or expensive equipment, and may work from your own premises.
Trading structure
Trade with more than one client at a time, or work on short successive assignments with different clients.
Financial risk
A loss can be suffered. All rejected work to be corrected at your own cost. Penalty clauses. The opportunity exists to make a larger profit from sound management.
Business organisation
Own premises, letterheads, other employees, insurance etc. Quoting for jobs in advance. Advertising
Terms of engagement
Contracts or understandings which record the above.
Mutuality of obligations
No obligation to offer and accept work over a period of time.
As explained, all these are mere indicators and the Revenue will take a view based on the overall impression given by how many of these conditions apply.
The key to determining whether an INDIVIDUAL is running a genuine business is that they are able to exhibit some or all of what a judge many years ago referred to as "the badges of trade".
These are:
Badges of Trade -Indicative of Self Employmen
Right of control
You have the right to decide how, when and by whom a job is done. Can send substitute to do job.
Basis of remuneration
Remunerated on a project basis, or at a fixed price.
Tools of trade
You supply large or expensive equipment, and may work from your own premises.
Trading structure
Trade with more than one client at a time, or work on short successive assignments with different clients.
Financial risk
A loss can be suffered. All rejected work to be corrected at your own cost. Penalty clauses. The opportunity exists to make a larger profit from sound management.
Business organisation
Own premises, letterheads, other employees, insurance etc. Quoting for jobs in advance. Advertising
Terms of engagement
Contracts or understandings which record the above.
Mutuality of obligations
No obligation to offer and accept work over a period of time.
As explained, all these are mere indicators and the Revenue will take a view based on the overall impression given by how many of these conditions apply.
Edited by Eric Mc on Friday 2nd January 13:32
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