Employed or Self Employed?


When you pay someone for some work it is your responsibility to get it right. Can you treat them as self employed or should they be on the payroll?

Employed versus self employed is always a thorny issue and the man who owns Pimlico Plumbers found out how difficult it can really be. In this instance the case went all the way to the Supreme Court which tells us this is a subject testing the top legal minds (so what chance have we). What’s more if you get it wrong our friends at HMRC can be very forthright in the way they’ll be dealing with you. Not only will you be told to pay the tax and NI (employees and employer) going back six years but you will be charged interest and there may be penalties.. 

This is one of the most common areas of advice we have to provide our clients. All too often someone is taken on and paid on the wrong basis i.e. self employed and not on the payroll. The most common reasons given are; Only works a few hours, works for other companies, doesn’t want to be on the payroll or we don’t want to employ them. 

Either way none of these are valid reasons and unless you can provide the right reasons you could very well find yourself in deep water.

Let’s look at a practical example: Let’s say when you start the business you take on someone as a book keeper and they come in once a month to sort things out. If they are taking things away to be worked on elsewhere and using their own equipment they are probably self employed. If, after time, however, they are coming in on a weekly basis and all the records are held on the company’s system their status may now have changed and they should be on the payroll.

You may have noticed I used words like “probably” or “may” and this is because every single case has to be looked at separately and if you read most of the court judgements they say the same.

Most people don’t have time to do extensive research and just want to be able to apply a few simple rules. For a subject as complex as this, that can be risky but it’s worth remembering it is the job being done and NOT the person that determines status.

Unfortunately, it’s one of those topics where the more you know the more you need to find out and it’s much more complex than most people are aware. It’s a specialist area and one where we have provided advice over many years. If you think there may a problem feel free to call and we’ll do our best to help.