Do they count as self-employed, or should I put them on the payroll?

A quick reminder about employing staff, or subcontractors in your business.

If you are paying someone direct to work for you then they are either a self-employed subcontractor or a member of staff – there is no such thing now as a casual worker.

Here is a brief description of each to help you decide how you should be treating them.   HMRC have an online tool that may also help you to conclude that your worker is an employee.  This is the same tool for use to judge if a worker is subject to IR35 when providing services via a limited company.

https://www.gov.uk/guidance/check-employment-status-for-tax

Alternatively, you could use an employment agency or similar company, to supply you with staff, who are then employed by someone else e.g. the agency – such that they have all these considerations – including IR35.

A subcontractor is: –

• someone who is in business in their own right – and you need to be assured that they are.
• knows how to do the job – does their own training, provides their own tools.
• who is responsible for their own work – fixing it in their own time if there is a problem.
• who reports their own income to HMRC and pays their own tax and national insurance.
• who you book to do the job.
• charges for the job.
• will give you an invoice to pay.
• should have their own insurance etc.

An employee is: –

• someone who is not in business.
• who provides themselves for you to use as per their job description.
• whom you instruct, control etc.
• whom you are responsible for e.g. health & safety, training, insurance etc.
• whom must be paid the minimum wage.
• and given holidays, holiday pay & sick pay, redundancy pay etc.
• and offered a pension, that you may have to contribute to
• from whom you must deduct taxes, and report wages to HMRC.
• and in general look after – with all the related regulations and rights

As you can see the cost to you of an employee versus a subcontractor, can be quite different.

Warning – If you treat someone as a subcontractor but they are not in business then HMRC could come back to you and demand the taxes etc as if that worker were an employee. And those taxes would be on top of what you have already paid them.

There can be benefits of having family members as staff as they are then eligible for staff benefits. Remember all employees, especially family, must have a contract, job description and actually be paid, at least the minimum wage.

A sole trader may “employ” members of their own family without paying them but not a limited company.  All family members of directors need to be paid for the work they do – and only directors are exempt from being paid the minimum wage.

There are special rules for some workers e.g. registered apprentices, charity volunteers, au-pairs and those undertaking work experience as part of a course.  So if taking on any such lower paid workers then be very sure you follow the relevant special rules.

If we can be of assistance in setting up payroll or you would like to discuss how to pay workers, then do contact us.