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Legal implications for business that employs freelance workers

I work for an events company who has permanent staff on the payroll and and also books freelancers to work on specific events.

Does anyone offer a good course on how to deal with employment status (I have read guidance at http://www.hmrc.gov.uk/employment-status/index.htm) and implications for the accounts payable department in terms of compliance?

Thanks in advance,

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23rd Sep 2011 09:46

Sound like employees

I don't know of any courses on employment status and I doubt that anyone would run one.  As you are aware, it is simply a question of determining their employment status.

Beware of glib terms like "freelancer", "casual" and "part-time", which seem to imply that special rules apply because they are a different breed of worker.  They are not different.  They are either employed on the payroll under PAYE or self-employed, in which case your accounts payable department might be involved, but not otherwise.

If they are providing nothing but their labour and are working alongside or under the direction of your permanent employees, they are almost definitely employees and you must apply the PAYE procedures.  This would normally mean completing and submitting a form P46 (assuming that they do not produce a P45).  However, you may well be able to use the special PAYE procedure for taking on employees for one week or less, under which, depending on their level of pay, you may not have to submit a P46 but, instead, you deduct tax at 20% on code BR and file a P45 when they leave.

As to legal implications, you need contracts of employment.

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Oddly enough I received the following email today -

 

 

 

 

Wednesday September 28 2011

Employing temps -

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the Agency Workers Regulations

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Regards
Duncan Callow
Editor-in-Chief

 

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23rd Sep 2011 11:57

Depends on how long they work for you, whether it is regular and whether they give you a P45 and how much they are going to earn.

HMRC Say:

Employees who work for less than a week

If you take on an employee for less than a week the PAYE procedures you must follow depend on whether or not the employee gives you a form P45 from a previous employment.

The employee gives you a P45 from a previous employment

If you take on someone for less than a week and they have a P45 from a previous employment, then you should follow the usual rules for taking on an employee. This includes using the information on the P45 and then completing a new P45 for the employee at the end of their work with you.

Taking on a new employee

When an employee leaves or retires - including completing a P45

The employee doesn't have a P45

Normally when you take on an employee without a P45 from a previous employment, you have to complete a form P46. However, if you are taking the employee on for less than one week you don't need to fill in a form P46.

Instead, you should take whichever of the following sets of actions apply in your case. They differ depending on how much you are paying the employee and whether or not the employee has another job.

If you pay the employee less than the NICs Lower Earnings Limit (LEL) - £102 a week for 2011-12:

keep a record of their name, address and how much you pay themdon't deduct PAYE tax or NICs from their paydon't update a form P11 or equivalent employee payroll recorddon't complete a form P45 when they leave

If you pay the employee equal to or more than the NICs LEL and they have another job:

update a form P11 or equivalent employee payroll recordcalculate and deduct PAYE tax from their earnings using the tax code BRcalculate and deduct NICscomplete a form P45 when they leave

If you pay the employee equal to or more than the NICs LEL and they don't have another job or you don't know whether they have another job:

update a form P11 or equivalent employee payroll recordcalculate and deduct PAYE tax using the emergency tax code on a week 1 or month 1 basiscalculate and deduct NICscomplete a form P45 when they leave

Note that while you don't need to complete a form P46 for these employees when they start working for you, you will have to do so if they continue working for you beyond one week, or if they subsequently work for you again later in the same tax year.  

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