Payments for stuffing letters

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Got a situation where a company will be posting thousands of letters and is looking to pay casual labour £50 per 1,000 letters stuffed into envelopes.

The idea is that friends and family of employees and business contacts could be engaged on an ad-hoc basis to do this task. 

My first thought was any casual labour should be put through payroll, but given the nature of the work, presumably it could be treated as self-employed work? It'll be a very informal arrangement, and they'll be free to choose where and when to do the work. They'll not be obliged to accept work, and nobody will care if they engage a substitute. It'll also be well within their annual trading limits.

Would others agree that it is okay to just make gross payments for this type of work?

Replies (18)

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By Hugo Fair
01st Jun 2022 23:35

"Piece work (or piecework) is any type of employment in which a worker is paid a fixed piece rate for each unit produced or action performed, regardless of time taken."

This is what you've described ... and has no relevance as to the employment status, which sounds very much like 'employee' (not self-employed).

If "friends and family of employees are engaged" then they will also be employees (or sub-contractors of the first employee - depending on with whom they have a contract to do work and to get paid).

So, no, personally I don't agree (based on the limited info provided) that it is okay to just make gross payments for this type of work ... but forget all the red herrings (piecework, casual labour, etc) and focus on the employment status test.

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By jonharris999
02nd Jun 2022 10:01

You must apply the Employment Status test, and every player in this game wants you to pass it: you because it's way less headache, the stuffers because they will all be <1K and therefore don't have to declare, and even HMRC because the cost of collecting PAYE on all this will be higher than what comes in.

So, in trying to pass it, help yourself by stating certain things in a written contract letter:

* You have already identified that they can use substitutes - state this explicitly
* Control and use of resources should be easy - important to agree a deadline for delivery but state that the stuffer chooses when, where and how they do the work and you don't provide them with any equipment
* MOO - state that you can take the work away any time you like, and they can pass up the work any time they like, even after they've started it

....and then IMHO you pass.

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Replying to jonharris999:
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By gillybean04
02nd Jun 2022 12:29

jonharris999 wrote:

So, in trying to pass it, help yourself by stating certain things in a written contract letter:

* You have already identified that they can use substitutes - state this explicitly
* Control and use of resources should be easy - important to agree a deadline for delivery but state that the stuffer chooses when, where and how they do the work and you don't provide them with any equipment
* MOO - state that you can take the work away any time you like, and they can pass up the work any time they like, even after they've started it

....and then IMHO you pass.

How does that work with HMRCs disclaimer about contrived arrangements being considered deliberate non-compliance and attracting higher penalties?

How many other clients are these family and friends stuffing envelopes/otherwise working for? Who pays the substitute? Who provides the letters and envelopes (and possibly postsge)? Is any instruction being given on how to stuff the envelopes? If they damage an envelope, who pays for the replacement?

Is GDPR involved (if dealing with personal data of individuals)? Because a self employed person would be a third party processor. The contract would need to, as a third party data processor for the controller, cover GDPR, security and storage of data, data breaches etc.

CEST is also only for income and NI. So you'd still need to check the position with regards to employment law and things like NMW, holiday pay etc.

IMO it would make more sense to have them employed or outsource the work to a business who provide the service commercially.

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Replying to gillybean04:
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By jonharris999
02nd Jun 2022 15:09

What is "contrived" about my suggestions, Gilly? Aren't I reflecting the reality of the agreement?

If you take the view that CEST will only work for a 'proper' business, and otherwise it's PAYE or outsource to a proper business, where's that going to end? Babysitting? £5 for walking the dog, washing the car, cutting the grass....?

It is in nobody's interest, least of all HMRC's, to make a PAYE employer of every household.

We had a very interesting related thread a few weeks ago, too, about how it is at least arguable in law that more than 1K but less than PA trading income should not lead to a requirement for SA.

Thus conscience doth make PAYE employers of us all, as the poet said. (Claiming an averaging adjustment as he did so - 1606/7 was a lean year.)

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Replying to jonharris999:
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By gillybean04
02nd Jun 2022 16:17

You're conflating completely different circumstances in my opinion.

The things you describe are for domestic household purposes. Not that of a trade. But, even those for domestic purposes can be required to register as an employer and run payroll. Such as someone hiring a childminder (or babysitter if you prefer), gardener or a domestic help due to age or disability.

Your post didn't say to answer the questions accurately, or to ensure that in practice you don't supply their tools or tell them how to do the job etc. It quite literally just said a letter of contract should state certain things.

I was saying it's not as simple as that. There is much more to consider and that it depends what happens in fact, not what is stated happens in order to get a certain desired result from an online tool (which I would say is the very definition of contrived).

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Replying to gillybean04:
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By jonharris999
02nd Jun 2022 16:57

Oh, alright then. If it needs stating, I did not mean "you should pretend that these things are happening even if they are not". I meant "you've either told us these things are happening or I presume everyone can agree they should, so clarify things and protect yourself by writing them down".

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By WhichTyler
02nd Jun 2022 11:23

Or https://cheapfrankingmachinesupplies.co.uk/neopost-ds-40i-folder-inserte...

Breakeven is 53k letters, and you don't have the hassle of distributing and collecting loads of materials, tracing who has stuffed how many, making lots of small payments to small suppliers etc etc

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Replying to WhichTyler:
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By Hugo Fair
02nd Jun 2022 11:44

Good point/suggestion ... although begs the question in that I can't conceive why anyone nowadays would want to stuff thousands of envelopes?
[If material is to be posted then the cost of postage is going to be astronomical - or if it is to be stuffed direct through front-doors then why bother with the envelope?]

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Replying to Hugo Fair:
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By WhichTyler
02nd Jun 2022 11:47

Hugo Fair wrote:

Good point/suggestion ... although begs the question in that I can't conceive why anyone nowadays would want to stuff thousands of envelopes?

That too, but the heart (and OP) have their reasons...

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Replying to Hugo Fair:
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By DKB-Sheffield
02nd Jun 2022 12:34

Well... HMRC want to send thousands of letters... they just don't know what to do about receiving, reading, or responding to them!!!

I spend longer reading my junk mail (30seconds) than HMRC devote to reading our letters! At least I 'action' (shred) within a day!

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By DKB-Sheffield
02nd Jun 2022 12:26

Call me cynical but, I would suggest the motivation behind the proposed option is more to do with paying at a rate below that of NMW than any concerns over adding employees to payroll, making deductions, or even 'on costs'.

To pay £9.50 per hour, that would require almost 200 envelopes per hour 'stuffing'. Even with pre-labelled/ pre-paid envelopes, non-person-specific contents, self-seal (i.e. not peel & stick), 200 is going some! However, if all 'stuffers' were youngsters, that may be more likely - that is not, however, what seems to be being suggested

So many employers 'think' the way to avoid paying NMW is simply to pay 'employees' but say they are 'self-employed'. Regardless of any other tax, CEST, employment law issues... most of these 'employees' don't even realise the implication of 'self employment', or the additional tax (and more importantly - non-tax) complexities of such an arrangement. The income may be reportable for UC, TC, and other benefits. What seems like £50 'cash in hand' for a few hours work may be nowhere near £50 in real terms (assuming all is reported legally).

As you are well aware, the £1K trading allowance is not 'per self employment trade', it is per annum. It cannot be claimed for 1 trade, with 'normal expenses' claimed in another. This would impact someone with 'other self-employment' income as it would be reportable. Furthermore, it is impossible to say whether any of these 'employees' have used their allowance or not (eBay side-hustle for example). To use the £1,000 trading allowance as justification to your client (or by your client) is plain wrong... unless you are also representing all of their 'employees', or have an intimate knowledge of their tax affairs.

Could this be done? Possibly. However, there would need to be a significant effort on your client's part in both drafting contracts, actually contracting, and ensuring proper documentation is obtained from the relevant 'employee' (with clear riders that it is a service contract, and that they are liable for their own tax). Even then, you may only succeed in the 'employee' being classed as a 'worker'.

If your client is mailing 1,000,000 envelopes, the legal legwork may be worthwhile. If 10,000... the 'costs' of employment are pretty insignificant - assuming NMW is paid - as Eer NICs (and Eee NICs) on £50 (or even £60 if you gad to gross up) would be £Nil!

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Replying to DKB-Sheffield:
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By Hugo Fair
02nd Jun 2022 12:36

All good points ... although I guess final line should say "on £500 (or even £600 "?

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Replying to Hugo Fair:
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By gillybean04
02nd Jun 2022 12:52

I think he meant 10,000 letters total, rather than per person.

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Replying to DKB-Sheffield:
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By DKB-Sheffield
02nd Jun 2022 13:01

Hugo and Gilly...

Yes, I suppose both are equally correct with my confusing final paragraph.

Gilly, that's what I meant (1,000 per time... e.g. per week)

Hugo, equally correct, someone processing 10,000 (more likely in a month) at £500 - £600.

Thanks to both of you!!!

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By Justin Bryant
02nd Jun 2022 13:25

I think that's pushing the envelope a bit.

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By Ben McLintock
02nd Jun 2022 14:30

Thanks all. They're not personally addressed letters - just welcome letters inc vouchers for guests.

These kind of scenarios always send me in circles. Initial thought is that since RTI, all casual labour must go through payroll. But then struggling to 100% refute the suggestion that they could be treated as self-employment / micro-trading payments...

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Replying to Ben McLintock:
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By DKB-Sheffield
02nd Jun 2022 14:48

Notwithstanding everything else noted be everyone above...

The possible justification would be along the lines of:
"Who decides whether they are self-employed?"

That is a whole different question to...
"Who decides whether they are employed?"

One is for your client to assess. The other is certainly not your client's remit!

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