Using temporary/ad-hoc staff

Using temporary/ad-hoc staff

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A client has only 4 permanent staff. The work they do involves projects lasting around 3-12 months. For this, they require extra staff on an ad-hoc sort of basis to do work such as street questionnaires, telephone surveys etc. 

They don't use staff from an agency, they use a mixture of students, jobbing actors etc. They don't take them on as employees on the payroll, but they do however use certain workers time after time for different projects. The workers then invoice the company and are paid as suppliers. 

As far as I can tell - from HMRC advice on employment status - these workers should be classed as employees, not suppliers.

Am I correct? 

Replies (4)

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By tonycourt
07th Dec 2011 16:53

 Hi Cherryj,

 Hi Cherryj,

I would want a lot more information before deciding on whether the workers were employees or self-employed, but here are a few things to consider:

what are the terms of engagement eg., do the workers have an unfettered right to send in a substitute, if not then;how much control does the employer have over the manner in which the work is carried out.

My gut feeling is that if the answer to the first point above is no then the workers are employees. The "employer" should put them on the payroll but might still avoid having to deduct PAYE tax and NICs where either one of the following two conditions are met:

the worker is in full time education and working in their holidays and they have signed a form P38Sthe employment qualifies as casual work - see page 76 of HMRC CWG2 (Employer Further Guide to PAYE and NICs)

TC

 

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By cherryj
08th Dec 2011 09:19

Thanks - the employer has control over how the work is carried out, workers often carry out work (telephone calls etc) at the company's offices, using their equipment (telephones, computers...), they don't have the right to send in a substitute...

They meet all the requirements for employees.

 

I have read about "Zero hours contracts" but can't seem to find anything on HMRC. How do these work? Are all employees listed on the company payroll, but may not necessarily be paid each month? 

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Euan's picture
By Euan MacLennan
08th Dec 2011 10:31

Employment for up to one week

If they are employed for less than one week and don't actually work for more than one week, you don't have to complete and submit a form P46, but if they produce a form P45 or are paid more than the NI LEL (£102 in 2011/12) or have another job, you have to put them on the payroll and submit a P45 at the end of the week.  Even if they are paid less than £102 for the week and don't have another job, you have to keep a record of their details, which it is probably easier to do by putting them on the payroll anyhow.  See the HMRC guidance online or on page 23 of the E13 Helpbook, Day-to-day payroll.

If they are students working in the holidays and complete a P38(s), you don't have to deduct tax, but you still have to put them on the payroll if they are paid above the NI LEL.

Page 76 of CWG2 is not relevant as it refers only to farmers employing casual workers or gangs for the harvest.

Unless the employees satisfy either the one-week or student rules, you must apply the normal PAYE procedures of completing and submitting a form P46 or a form P45 if one is produced, applying the PAYE code relevant to their circumstances on the P46 or as shown on the P45 and processing NIC if their pay exceeds the secondary (er's) threshold in the pay period.

If you are satisfied that they are employees, and it certainly sounds as if they are, there is no way around this.

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By Steve Kesby
08th Dec 2011 10:59

Zero-hours

For a contract of service (=employment - as opposed to a contract for services = self-employment) to exist, there is an irreducible minimum of factors that must be present in the contractual relationship:

personal service. This aspect is key.  As Tony says, the effective right to send a substitute means that a contract of service cannot possibly exist.  I don't completely agree that the right must be unfettered though.  A contract for services may still exist where the engager has the right to reject the offered substitute.control over the where, when and how.  This is not especially determinative as the degree of control may vary.  At one end of the scale you will have a skilled professional, where the engager's control is limited, but is nonetheless employed.  At the other end of the scale you will have a labourer that is controlled to the Nth degree, but is nonetheless self-employed.mutuality of obligations. This is the second most critical aspect, which HMRC don't seem to understand and certainly misrepresent in their manuals.  There must be an obligation on the part of the engager to offer work and there must be an obligation on the part of the worker to accept such work.  Without mutuality of obligations there cannot be a contract of service.

Zero-hours contracts are a kind of flip-side of mutuality of obligations, in that it is possible to have a contract of service where there is no particular obligation on the part of the employer to offer work.  I'm no great expert on employment contracts, but I'd suggest that unless and until they do offer work, the contract is voidable by the employee.  There is, however, generally a restriction on the extent to which the worker can reject work, I think.

All that being said, it does sound rather like these individuals are employees, and if they are, it's a risky business not operating PAYE.  Subject of course to the exceptions to which Tony and Euan refer.

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