In the present economic conditions, it is quite obvious for businesses to be lured to take on self-employed workers instead of hiring people as employees. Not to mention, the flexibility and benefits that come with self-employed workers are aplenty. This includes paying them only when they generate acceptable end results, them not being entitled to any of the employment rights (except for non-discriminatory rights) and lesser management and administration expenses. This in itself is reason enough to hire them.
All of this seems too good to be true, doesn’t it? But, ever wondered why other businesses aren’t doing the same?
Well, the answer is quite simple! The ‘employment status’ of every individual has to be correctly justified, because you never know when it can be confronted. During that point, if you’re unable to validate the authenticity of your workers self-employment agreements, then there are pretty good chances that either them or you might face huge financial penalties from HM Revenue and Customs.
Now, you might be wondering what is it that you must look out for when hiring a self-employed worker. Well, don’t you worry because we at Northants Accounting have got your back!
Below we’ve mentioned few important things, which you need to keep in mind before getting self-employed worker on board:
Check If They Have Been Exempted From PAYE
When you’re thinking of engaging with self-employed workers, you need to verify whether or not they have been exempted from PAYE. This is solely because as an employer, it’s your responsibility to pay income tax and National Insurance on their behalf.
A self-employed worker must not be paid via PAYE, if the points mentioned below are true:
- If they have registered for a business for themselves
- If they are accountable for the success/failure and profit/loss of the business
- If they can employ people to get the work done
- If you’ve agreed to pay them a fixed amount, regardless of when they finish the work
- If they’re using personal funds to purchase tools and equipments and business resources
Check Their Tax Reference Number
Just because there are risks involved in hiring a self-employed workers, it does not mean that you shouldn’t get one on board. However, in order to protect yourself and avoid any financial penalties, it is best to check their tax reference number. This is to simply ensure that they have actually been registered with HM Revenue and Customs, and are expected to file for tax return.
Check The Employment Rights They Are Entitled To
Except for the non-discriminatory right, a self-employed worker does not enjoy the raft of employment rights that ‘an employee’ does as per the law. These mainly include:
- The right to paid holidays
- The right to legal sick pay
- The right to maternity leave
- After one year’s service, the right to being fairly dismissed
- Parental and paternity rights
Check Your Insurance
Last but not the least; you must take a look at your insurance. There are times when the content in it lets you know whether it applies to your employees or the third-party worker. The bottom line is to make sure that you are the one who is always covered.
Of course, for you it will be better to hire workers on a self-employed basis. Nonetheless, they must be employed only if you are sure that if ever you’re being confronted, you’ll be able to convince both the employment tribunal and HMRC that the worker is actually self-employed.
If you wish to know more about deemed or artificial employment get in touch with us today!
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Tel: 01604 330129 Email: info@www.northantsaccounting.co.uk
