Is the chef employed or self employed - that is the question

Is the chef employed or self employed - that is...

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Hi, I have recently been approached by a potential new client who runs a restaraunt. His head chef works approximately 55 hours a week for him and does not work for anybody else. He also has two days off per week. The chef informed the owner of the business that he has to be paid on a self employed basis for his tax reasons and this has been in place for approximately 9 months. His weekly pay is £575. I have informed the owner that I think the chef should be on his payroll, given the circumstances above and that he would be on a very sticky wicket if he had an inspection from hmrc.

I should be very grateful for any comments/advice you may be able to give me on this matter

Many thanks

Mary

Replies (16)

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By WallyGandy
29th Nov 2010 09:11

He's employed, and that is the answer!

 There are many HMRC publications with "tests" for status- but why bother as there is nothing borderline here.

The chef wants self-employed for HIS Tax benefit, but the employer will carry the financial can for Employers and Employees NI as well as PAYE tax whenever this is discovered.  Plus interest and penalties.

One immediate way out of this is for the chef to become a "one man limited company"- your client is exonerated leaving the chef to deal with the ramifications of incorporation (and IR35).  

Best way out- replace him pronto.  After 9 months the numbers are stacking up big time....  

At present your prospect stands a grilling from HMRC.  On the evidence you've given he would be VERY well done.

 

 

 

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By taxhound
29th Nov 2010 10:52

Use the ESI

If anyone is still complaining, run through the employment status indicator tool with them on HMRC 's website.  That ought to clear it for them.  I agree he is almost certainly an employee, unless there is a little nugget of information we don't know.  The employer is running the risk of hefty back tax, fines and interest by allowing this to continue.

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By Steve Holloway
29th Nov 2010 11:04

Before you get rid of him .....

be aware that despite the chef having instigated this he could still bring about an unfair dismissal claim at an employment tribunal. They will consider whether he was an employee or not before hearing the main complaint and in this case would certainly decide that he was (regardless of who's idea this was!). As a minimum he will get notice pay so you might as well pay it now and save the bother later on. Also be aware that if it goes to tribunal then HMRC will be notified by default, so your client could expect a double whammy.

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By Guest1
29th Nov 2010 11:22

Servant and Master

there is little doubt, based upon the facts presented here.

It is obvious that the chef has led the engager to where he is now, with regard to engagement status but, it will be the engager, who will foot all the bills, whether they come from; HMRC or the Courts!

Sounds like the engager needs some expert HR assistance and a stronger character in future.

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By Cant Add Up
29th Nov 2010 13:12

self-employed

Mutuality of obligation written into - yes or no

Right of substitution written into contract - yes or no

these are the big two as regards emp vs s/emp

 

 

 

 

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By blok
29th Nov 2010 22:20

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contract!!   you must be kidding. 

even if there was a contract, if it didnt say he was an employee, it would be ignored by a tribunal.

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By Siân Woods
06th Dec 2010 12:10

Staples

Not enough information has been provided to determine whether or not the chef is self employed or not.  As Can't add up and Kayne have pointed out you need to look at Mutuality of obligations, control and personal service.  None of these have been addressed in the original post.

There is case law that supports the chef's position.  An unreported case, Staples v Secretary of State for Social Services, looks at the status of head chefs.  The High Court determined that they were self employed as head chefs are not subject to the necessary control required to make an employment relationship.  Although this is not a blanket decision that automatically applies to all head chefs, it shows that the normal tests need to be considered and that the answer is not always as obvious as it first appears.

Having said that as other people have commented the if the relationship was challenged and the chef was found to be an employee it would be the "employer" that would foot the bill.  Rather than ask the chef to operate via a limited company the best option would be to get some form of written contract in place that deals with the main areas. 

It does not necessarily have to be a formal document although this would obviously be best.  A simple letter/email from your client to the chef setting out the agreement as they see it.  Set out the main areas and ask the chef to sign a copy.  Reassess the situation on a regular basis and get both parties to resign.  This will help your client not only with a tax tribunal but also an employment tribunal.  Despite what others have said if it can be shown that the chef wanted to be self employed and voluntarily agreed  to the appropriate terms the tribunal will take account of it.

At the very least your client should ensure that he understands the terms and conditions that effect employment status, what his understanding of the agreement is in these areas, and makes sure that the discussions he has had with the chef, and any future ones, are in writing somewhere - notes of conversations.

If you want more detail on what should be included please email me.

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By blok
06th Dec 2010 12:42

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Oh come on! Seriously.

From the information provided it is fairly clear (to me anyway) that he is an employee.

I agree that a contract can be drawn up to manipulate and show a different picture and indeed some people make a living from doing just that.

Its not something I would particularly condone.  You can argue otherwise and quote cases all day long, but it is not changing the facts.

I quote -

His head chef works approximately 55 hours a week for him and does not work for anybody else. He also has two days off per week. The chef informed the owner of the business that he has to be paid on a self employed basis for his tax reasons and this has been in place for approximately 9 months. His weekly pay is £575.

You are right, status inspectors of HMRC do lose a lot of cases but I think this is just because these cases dont really set any precedent (no two cases ever really have the same facts) and the tribunal feels a bit sorry for the apellant because this is a grey area in general.

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By SimonLever
06th Dec 2010 13:01

Fire the chef!

If the chef were to be fired would he look for some form of compensation such as payment in lieu of notice, oreven want a notice period? Would he take your client to a tribunal for unfair dismissal?

If yes he is an employee and should be treated as such. If not then he may not be.

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By philfromleeds
06th Dec 2010 17:50

Head Chef

This Chef has a mind of his own. Maybe he could advise the restaurant owner how to cook the books. Now on a serious note, does the restaurant owner know how to cook? I do not mean scrambled eggs but how to get everything right, to manage the whole kitchen. If the restaurant owner is totally reliant on the chef and does not tell the chef how to do his job then the chef is like the boss. I would get the chef to specify in writing his terms and conditions of providing the service which he is doing. This would be from ordering the food to how he wants to be paid and the status he considers himself. When the public health inspector comes also it is the chef which must take on all that responsibility. I feel it is highly likely that the chef is self-employed

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By shgstatus
07th Dec 2010 13:22

Check all factors

Don't forget that the status factors include the right of control.  This is an area that needs handling carefully.

It's true that subsitutution is a big issue, but there is a case, Narich Property, where there was a right of subsitutution, yet the courts came down in favour of employment - a point that HMRC now delight in bragging about in their Status Manual.

Both parties need to accept that they may need to set up working practices that do not contradict the terms of the contract.  As has been pointed out in this correspondence, you can't simply draw up a contract which SAYS the right things and then just put it away in a drawer and carry on differently!

As an ex-status Inspector, combining this with 4 years private practice in status work, I invite you to email me if you'd like to discuss this further with a view to drawing up a contract which reflects reality and achieves what your client and the chef require.

Steve Gretton

[email protected]

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Euan's picture
By Euan MacLennan
07th Dec 2010 13:39

Romanian or Bulgarian?

Is the chef Romanian or Bulgarian by any chance?  If so, they are only allowed to be self-employed in the UK, not employed.

Just a thought!

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By Olivia Sena
01st Nov 2011 13:31

did u hear about free lance!!!!

did you people hear about free lance??? A chef can be free lance! The chef can go and cook another 3 hours, lets say, during the night, or when he wants, or do any addition hours, as he is self employed! And any addition hours that he can do, connected with his skill, and that is cooking, is connected with his business. There is nothing illegal about that. and the chef will be paying the taxes anyway!!!! IF he has a self employed UTR, the owner can not hold taxes in his name anyway.

And if a tax inspector comes, what is the big deal? I have an restaurant and i contracted a freelance chef to take care of it. simple! i pay him by hour and if he fails to do all the job by himself, that he can bring a help, or whatever, it s his business. 

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By Olivia Sena
01st Nov 2011 13:58

and how do you know that in the "2 days off" from that restaurant, the chef does not have another client! If the chef would be working through an agency, there will be no problem, is it? well, self employment does not necessarily mean you are getting your clients from an agency, u might be capable to find them yourself. Because the guy is a chef, so a certain skill is required, he can easily be self employed as long as all the jobs his doing are connected with his skill. Of course if he starts tomorrow working as a labour and also on top working as a chef, in this case he is obviously NOT self employed! As long all his activity is connected with a certain skill he has, than he can be, with no problem, free lance. In this situation the chef is in title to have "a mind of his own"! He is his own boss! Mind that being self employed is not avoiding taxes, and mind that in this field a chef is meeting expenses connected again with his business, that should be deducted from the profit! (the special cooking uniforms that are not provided by most of the restaurants, the special shoes, so on) And then tell me why a cleaner can be self employed and a chef not! :) Self employment is not ltd company! So a self employed is not suppose to act as a ltd, hiring other people and so on! Self employed people are expected to be capable to finalise the job by themselves, or they normally associate with other self employed people. Another example... a handyman! So tomorrow if I need instead of 2 hours per week, i need 5 hours per day a gardener... just cause i need it more, now the handyman (gardener) becomes employed by me just cause i need it more? 

I think that the chef can convince a court that he is self employed, of course depends on him or the person who was chosen to represent him! If he has another client that he sometime cooks for, even if that is once every 2 weeks, since he has 2 days off weekly, than his self employment status had been proven. My opinion!

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By Olivia Sena
01st Nov 2011 14:13

o, i keep forgetting things: there is no need of a written contract, Uk is one of very few countries that accept VERBAL contracts. even if a written one would be good.  and the chef must give the owner invoices! no payment can be made to a self employed without first receiving an invoice! After the owner receives the invoice, he makes the payment and also gives the chef a payment statement (reference of the invoice paid, the money paid, the taxes hold -0% as he is NOT under CIS) The invoices received from the chef are the owner prof!!!!! And that is it! 

 

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Replying to User deleted:
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By moonk
30th Apr 2014 08:49

self employment
i have resturants with 50 staff .i would like to make few of them self employed .can i do it?
your help pleade

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